Overview of Commodities, 2018Commodities entered 2018 on a hawkish sentiment, however, since then the market has trended lower, with trade wars and other factors affecting commodities’ prices.
The raw materials sector was marked in 2018 by the sell-off in the oil market, with the WTI Crude and Brent futures falling significantly since last October, from a year, futures on the oil market benchmark have already fallen close to 40 percent. The speculative upward rally in black gold prices since March has fallen by the wayside, notably by the record US shale oil production that has been hitting scraps almost every week, bringing the US economy to the throne of major world oil producers. The trade dispute between the two largest economies also ended up with a strong price resistance, at a time when the market had been largely supported by the announcement of US sanctions on Iran.
Regarding metals, aluminum was the highlight in 2018. The sanctions imposed in April by Donald Trump on the Russian oligarch, Oleg Deripaska, owner of Rusal – one of the world’s largest producers – London Metal Exchange futures more than 25 percent to near $ 2600 / t. However, everything went through a bluff, with the United States already agreeing to withdraw the sanctions in exchange for Deripaska to reduce its influence on Rusal, stabilizing the price around previous levels near 2000 $ / ton.
Regarding agricultural raw materials, soybeans were in the spotlight because of the trade conflict between the United States and China. After Trump announced mid-year import tariffs on US soybeans, futures in Chicago fell nearly 20 percent, prompting China to seek other suppliers to power its processing machine of soybean meal. Brazil ended up being the great beneficiary of this situation, since its neighbor to Argentina, went through a period of drought which led to significant reductions in its production. After the last negotiations between Washington and Beijing, Trump came to mention ten days ago that he had assurances from President Xi Jinping that China will resume buying American soybeans, yet US farmers have yet to see any progress in this matter.
This article was written by Francisco Quadrio Monteiro
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