a first warning of the risk of recession

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We try to get out of one and we already get into another. If we start the year with the price of raw materials skyrocketed, which has led to an inflation that has not been seen for years, now the first warnings to the contrary are beginning to arrive. The price of industrial metals has fallen this last quarter as it has not done since the 2008 crisis. A very abrupt change in trend that is associated with another feared economic concept: recession.

Copper, tin, aluminium… industrial metals fall in price. Metals seem to have peaked and since the last quarter they are seeing deep falls. Copper has fallen 22% since last week, aluminum 36% and nickel, although still higher than last January, has fallen 56% compared to the price it had just after the invasion of Ukraine . The fall is huge if we look at the last few weeks and analysts point to fear of lower demand and slower economic growth.

Since Bloomberg They explain that their Industrial Metals Index has fallen 26% this quarter, making it the worst quarter since 2008. There are materials such as tin that have lost half of their value, compared to the peak reached last March.

From inflation to recession. The commodity boom contributed to inflation. Now they fear that its decline will lead us into recession. The logistics crisis and the boom in raw materials has led both the United States and Europe to raise interest rates, but there are now fears that this could lead to lower demand and a recession closer. This precipitous drop in the price of metals is a first indication that it may be close. “It’s certainly a possibility,” Jerome Powell repliedchairman of the Fed.

It is not the only factor casting doubt on the industry. Economic activity in China has been affected by the lockdown measures and is expected to stall.

At 2022 lows, but still with inflated prices. Materials such as lead or zinc are at their lowest in 2022, but they still have room to drop in price, at least when compared to before the pandemic. Copper is currently trading at about $8,500, far from nearly $11,000 at the beginning of the year, but still above the $6,000 it was before the pandemic.

To understand inflation, you have to look at maritime transport: its rates have skyrocketed by more than 1,000%

At its worst, it dropped below $5,000. Some ups and downs in basic materials that are making the entire world economic system dizzy. A drop now in metal prices is a great indication that prices may be moderating.

In Europe, inflation continues to worry more than the recession. Christine Lagarde, President of the European Central Bank, downplayed the possibility of a recession in the euro zone. For this reason, it continues to bet on raising interest rates to combat the most immediate phenomenon, inflation. From the Bank for International Settlements They have also alerted of the risk of recession in 2023, but they consider that the priority is still to fight against the increase in prices. We will see where we are in the coming years.

Image | Bakhrom Tursunov

We try to get out of one and we already get into another. If we start the year with the…

We try to get out of one and we already get into another. If we start the year with the…

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