Creamer Media Login

Commodities have lost 20% since June’s peak amid recession fears

7th July 2022

Font size: - +

A key commodities gauge has plummeted since reaching an all-time high a month ago as recession fears ravage what was one of the most resilient corners of the market.

The Bloomberg Commodity Spot Index, which tracks 23 energy, metal and crop futures contracts, has lost more than 20% after touching the record in June. Prices for everything from gasoline to wheat are slumping on concerns that a stagnating economy will hurt demand. Though commodity supplies remain tight, the retreat could provide much-needed relief to consumers struggling with surging inflation.

Commodities had been advancing since the early days of the worldwide pandemic as massive government spending and ultra-low interest rates bolstered demand while production was curbed. Russia’s war in Ukraine exacerbated supply disruptions.

But sentiment has shifted as fears grow that the Federal Reserve won’t be able to tame the highest inflation in four decades without throwing the economy into a recession. A surge in the US dollar -- which makes it more expensive to buy raw materials priced in the greenback -- has also weighed on US-traded commodities. Hedge-fund managers recently slashed bets on higher commodity prices to the lowest in almost two years.

Still, recession is a “highly anticipatory concern”, and markets have “clearly overreacted” by bringing prices for commodities back to pre-war levels even as supplies of raw materials such as oil remain tight and vulnerable to disruptions, according to Greg Sharenow, who manages a portfolio focused on energy and commodities at Pacific Investment Management Co.

While the recent surge in energy and food costs worked as a “very big tax” weighing on consumption, demand should re-accelerate in the next months and keep markets tight as China’s economy rebounds, Sharenow said in an interview.

Edited by Bloomberg

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

Click Here

MAGAZINE & ONLINE

➕

RESEARCH CHANNEL AFRICA

➕

CORPORATE PACKAGES

CLICK FOR A QUOTATION

➕