The commodities rally, spanning from cocoa to zinc, is at its peak in the last two years. There are positive indicators for increased demand for beef and pork, as the official start of barbecue season in the US with Monday’s Memorial Day holiday approaches. Additionally, OPEC+ is scheduled to review oil output curbs on June 2, coinciding with the beginning of the Atlantic hurricane season, a time when storms can pose a threat to US crude production. Here are five notable charts to consider in global commodity markets as the week gets underway.
Commodities
This year has witnessed a rolling series of commodity price spikes thanks to supply constraints, surging demand and even some speculative activity. The number of the 34 raw materials on the Bloomberg Commodity Index with total returns of at least 25% over three months is at the highest since the middle of 2022, according to Bloomberg calculations. Those materials enjoying such robust returns are cocoa, copper, nickel, orange juice, silver, tin and zinc. The relatively broad-based rise in industrial metals is noteworthy and raises another question about just how benign the inflation outlook may be moving forward.
Meat
Memorial Day in the US marks the unofficial start of the outdoor grilling season – bringing an annual boost in demand for meat. Profit margins for beef packing topped those in pork last week for the first time since September. That’s because the US has relatively ample amounts of hogs while packers have to pay up for tight cattle supplies. Those more volatile beef profits could challenge those from hog meat this barbecue season, given that Americans generally prefer to grill steaks and burgers over pork chops.
Oil
The Organization of the Petroleum Exporting Countries and its partners will meet online on June 2 to discuss supply cuts. However, factors such as storms can also affect crude markets. This year’s Atlantic hurricane season is expected to be “above normal,” with the potential for 17 to 25 named storms from June through November, according to the latest forecast from the National Oceanic and Atmospheric Administration.
That brings heightened risk for weather-related production outages in the US oil and natural gas industry. Hurricanes mainly affect petroleum markets by disrupting offshore crude oil production in the Gulf of Mexico and refinery operations. The storms can also reduce gas production from platforms in the gulf. Oil held steady Monday with Brent futures holding above $82 a barrel after dropping 2.2% last week, while West Texas Intermediate was around $78 a barrel.
Cobalt
China is preparing to scoop up a record 15,000 tons of refined cobalt for its state reserve this year as prices for the battery metal languish around five-year lows. Cobalt, which is used in electric vehicle batteries, is among those metals considered “critical” by Western nations trying to loosen China’s supply-chain dominance and avoid future shortages.
China accounts for about four-fifths of global cobalt refining. Purchases by China’s state stockpiler can have a material impact on commodity prices — which could be notable for cobalt, whose slumping price is due to booming production in the Democratic Republic of Congo and Indonesia.
Renewables
The US power grid is set to receive a significant boost from renewable energy sources. The nation’s total generating capacity is expected to increase by 80% by 2035, largely due to the addition of nearly 1 terawatt of new solar and wind power, according to forecasts from BloombergNEF. The anticipated addition of 737 gigawatts of solar power is more than four times the total installed capacity at the end of last year, while the addition of 200 gigawatts of new wind power will more than double the nation’s turbine capacity.. The projection comes as utilities race to strip carbon from the grid while adding new capacity to meet booming energy demand from factories, artificial intelligence and electric vehicles.
Source: Bloomberg L.P.
