The Corona crisis and the Ukraine war had caused the prices of most raw materials to rise to record highs, fueling global inflation. But the trend has been changing for about a month. For many commodities, the prices are almost racing down. However, this is not a good sign.
The boom in raw materials is over. The prices for energy sources, industrial metals and food have been falling rapidly again for weeks. Most prices had their last highs between late April and early June. Since then, wood has fallen by 53 percent. Palm oil fell 46 percent in price, wheat 40 percent and sunflower oil 33 percent. This is always calculated using the stock exchange prices in the USA, which are usually decisive for the world market.
Among metals, copper and nickel recorded the largest price declines at 24 percent, aluminum fell in price by 19 percent and zinc by 15 percent. Oil – both the North Sea variety Brent and the US variety WTI – is currently costing 97 and 91 dollars per barrel respectively, the same as last February before the outbreak of war in the Ukraine.
World market prices have an impact on German end consumers, but in a reduced form. About 14 percent of the 24 percent drop in oil prices came to German drivers. Gasoline and diesel prices have fallen by this amount since the end of May. However, the tank discount also plays a role. Edible oils and foods made from flour and rice cost even more in June than in May. Should world market prices influence supermarket prices in Germany, this will only be reflected in the inflation rate in the coming months.
Economists are critical of the falling prices for raw materials, metals and food. While at the beginning of the year they were worried about rising prices because they were fueling inflation, now it’s not so much the falling prices as the reasons that worry the experts.
The inflation rate in Germany is higher than it has been for 40 years. FOCUS Online therefore asks: your everyday life consists only of savings? You really have to spend every penny and are constantly looking for ways to make a living cheaper? We want to tell your story. Please write to us at mein-bericht@focus.de. Please briefly describe your situation to us in an e-mail and also tell us when we could contact you by phone in the next few days. Thanks very much!
World market prices for raw materials are primarily controlled simply by supply and demand. If prices fall, this can only be attributed to an increase in supply or a decrease in demand or a combination of both. The reasons are not uniform for all raw materials. Wheat and sunflower oil, for example, are becoming cheaper because Ukraine, as one of the most important export countries for these two products, has started exporting again – so the supply is increasing.
But: That does not mean that these foods are suddenly affordable again. Wheat still costs about 70 percent more than before the start of the corona pandemic in 2020. It is 85 percent for sunflower oil. This puts a strain on German consumers, but it is catastrophic for other countries. Especially in East Africa and the Middle East, where many countries are dependent on wheat imports, severe famines are raging with thousands of deaths.
There is an easy way to reduce electricity and gas costs. Comparing gas and electricity prices is extremely straightforward.
The situation is different for industrial metals, oil and natural gas. Here the supply has not suddenly increased, but the demand has fallen. If states had boosted this during the Corona crisis with escalating economic stimulus programs, that is now over. Here the focus is particularly on China, which was a Mecca for metal imports with its construction boom and countless production sites. But the strict no-Covid policy here leads to lockdowns and economic restrictions.
China could face a fate that economists fear more and more for the USA and European industrialized countries: a recession. This would occur if economic output fell in two consecutive quarters. In Germany, growth between April and June was already exactly 0.0 percent. A falling demand for raw materials is considered a leading indicator that this trend could become more negative. This is due to the fact that raw materials are ordered by industrial companies, which use them to produce preliminary and end products that only end up on the market months later. So if these industrial companies now order fewer raw materials, they will produce fewer products in the near future and accordingly fewer goods will be sold commercially and exported – economic output will fall.
In addition, despite falling prices, many raw materials are still in short supply. In the July survey by the Ifo Institute, 73 percent of German companies reported that they continue to suffer from material shortages.
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