Important Information
This information is provided for general educational purposes only without regard to your particular investment needs. This material, including any attachments or hyperlinks, should not be taken as investment or tax advice of any kind whatsoever (whether impartial or otherwise) on which you may rely for your investment decisions, nor be construed as an offer, solicitation or recommendation for any investment strategy, product or service. Investors should consult their financial and tax adviser before making investments in order to determine the appropriateness of any investment discussed herein.
Material authored by any particular Artisan Partners individual or team represents their own views and opinions, which may or may not reflect the views and opinions of Artisan Partners, including its autonomous investment teams or associates. Statements are based on current market conditions and other factors, which are as of the date indicated and are subject to change without notice. While this information is believed to be reliable, there is no guarantee to the accuracy or completeness of any statement in the discussion.
All investments are subject to risk, which includes potential loss of principal. Past performance is not indicative of future results.
This material may reference index or other information that is subject to copyright by its respective service provider, including the following: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Frank Russell Company ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication. The herein referenced S&P index ("Index") is a product of S&P Dow Jones Indices LLC ("S&P DJI") and/or its affiliates and has been licensed for use. Copyright © 2024 S&P Dow Jones Indices LLC, a division of S&P Global, Inc. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). None of S&P DJI, Dow Jones, their affiliates or third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Source ICE Data Indices, LLC, used with permission. ICE Data Indices, LLC permits use of the ICE BofAML indices and related data on an "as is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Artisan Partners or any of its products or services.
© 2024 Artisan Partners. All rights reserved.
Supply/Demand: Revenge Spending in Commodities
Supply/Demand is a semi-regular feature of the Artisan Canvas rounding up interesting and quirky subjects from across the Internet with a focus on economic and business trends. A good rule of thumb among the Artisan Canvas editorial staff is “never reason from a price change.” With that in mind, our latest edition of Supply/Demand.
The price tags for (seemingly) everything have gone up, from electronics to cars to food—partly because commodities prices have also jumped. Some are related to pandemic recovery, particularly in China. For others, geopolitics are at play—again, also frequently related to China. Here are the commodities trends that caught our collective eye:
Carmakers’ growing angst over manganese
Manganese processors in China have united in a state-supported effort to form the “manganese innovation alliance.” Car manufacturers, who use manganese in steel-strengthening products and batteries, fear this alliance is just another term for a cartel and a way to control manganese prices, given China supplies 90% of the global total. Through April 2021, tightening supply contributed to a 70% increase in manganese prices in Europe.
China signals commodities price concerns
Globally rising commodities prices have also reached local companies in China, where industrial profits grew by 57% YoY in April. That’s down from March’s 92.3% and is skewed by 2020’s pandemic-related slowdowns. Nevertheless, the government has warned producers against price manipulation or speculation, to protect small businesses whose margins have been squeezed by record highs in copper and iron. Given local businesses still account for the majority of China’s GDP and tax revenue growth, hardly a surprising response.
Milk experiences an utter surge
Fonterra, the world’s largest dairy exporter, raised the midpoint price per kilogram expected next year to NZ$8.00, up from NZ$7.55 amid increased demand from China’s food sector, which is also contributing to rising corn prices. US milk supplies have been less impacted, partly due to more milk cows producing.
A decades-long head start in rare earths
China controls between 70% and 80% of the rare earths market, which includes some 17 metals ranging from neodymium, dysprosium and yttrium. The US, which has only one operational rare earths mine, has sought to secure its supply chain, given the metals are vital to technologies and chips in phones, electric cars and wind turbines, among many other uses. When the China-US trade battle escalated in 2019, China threatened to cease rare earths exports to the US, prompting the current US effort. The Biden administration’s infrastructure proposal includes millions of dollars to improve the rare earths supply chain—an effort in which the US has allies, including Europe and Australia. But it remains early days—it could take decades before the effort impacts China’s dominance. Meanwhile, increasing demand for electric vehicles and other technologies requiring rare earths has caused demand-driven price boosts similar to more industrial commodities.
Tin prices melt up
For the past two years, tin demand has fallen—partly as semiconductor demand declined (hard to imagine today) and partly because the pandemic forced factory closures. Now, rising demand for electronics, like laptops and smartphones, has pushed tin demand up again, just as production has declined—a combination resulting in (drum roll …) rising tin prices, which have surpassed decade-long highs, climbing beyond 2011’s $33,250 per ton price tag.
Contact the Editorial Staff
Have a question or comment? We welcome your feedback. Comments will not be made public, but will be read by a member of our editorial staff.
Thank you for your question or comment.