why metal prices diverge

why metal prices diverge

© Supplied by La Tribune
The Chinese steelworks, the first in the world, are located far from Wuhan province and have remained dynamic despite the crisis.

First there is the fall of the lost paradises: palladium and rhodium. As a result of dieselgate and the emission standards that followed, gasoline engines were preferred to diesel engines, leading to an increase in the consumption of palladium and rhodium in automotive catalysis. The movement has not escaped speculation, the prices of the two metals soared to the point that we qualified these two markets a few weeks ago on this blog, pomegranates wrapped in chocolate.

Shortly after, the grenades exploded. Palladium prices have dropped almost 50%, rhodium prices have gone from over $ 14,000 to around $ 3,000 today. This last metal republishing, as every ten years, the same speculative bubble: spectacular rise and rapid fall in 1990, 2000, 2010 and 2020.

Limited fall for non-ferrous metals

Not surprisingly, the fall is general but limited in the base metals: copper, aluminum, nickel, zinc. The collapse of prices is also important in energies with the historic fall in natural gas prices and the oil war affair between Riyadh and Moscow. It is also for certain commodities: sugar, cocoa, cotton …

But other compartments resist, notably the steel industry. The V-shaped curve of the price of iron ore, gone from 95 dollars, before the Chinese New Year, then logically to 80 dollars at the time of the holidays, and 90 dollars currently, is explained in two ways. On the one hand, the Chinese steelworks, the first in the world, are located far from the province of Wuhan and have remained dynamic despite the crisis; on the other hand, Chinese iron ore production sagged in the Beijing New Year without having really recovered since. As a result, more than in the past, imports of iron from Australia and Brazil have met demand, and prices for iron overseas are firm. Likewise, steel prices have recently started a V-shaped curve. Other materials related to the steel industry are also seeing their prices cross the V-tie and rise, such as sea freight or molybdenum.

Perhaps it is linked to containment, but agricultural raw materials also have atypical prices, oriented upward: tea, coffee to a certain extent, and the star of the moment whose crisis has only strengthened the dynamism and storage, rice.

Gold rebound

As for gold, after having been rising continuously, it exceeded the threshold of 1,700 dollars and lost only 10% before rebounding. A positive performance compared to that of stock market indices.

As expected (see this video), these will illustrate the temporality of the crisis. In China, it will probably be resolved at the end of the first quarter, and we should experience the same outcome in Europe, but at the end of the second quarter.

By then, I hope that we will have thanked, in consideration but also in budgets, the admirable dedication of the world of health: nursing assistants, nurses, nurses, medical students, civil and military doctors as well as the health reserve .


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