Commodities outperformed other asset classes last year, with the S&P Goldman Sachs Commodity Index rising by more than 30% to beat the U.S. equity index S&P 500, for the first time in 10 years. However, uncertainty over recovery from the pandemic caused major commodities to experience significant volatility, with some undergoing huge swings amid counteracting supply and demand narratives while others recorded new highs before dropping significantly. China played a role in some commodity markets, as the country is the second main importer of copper, coal, iron ore, crude oil and liquefied natural gas globally.
The country’s impact was mostly felt in the metals sector, with spot iron ore hitting $235.50 per ton in May, as steel mills produced high amounts of the material. Chinese demand also influenced copper positively, with contracts in London hitting $10,747 per ton in the same month. When the nation shifted course on the output of steel, the price of iron ore dropped, with its spot price hitting $87 per ton in November.
Iron ore’s spot price has recovered, with last week’s figures showing that the metal is trading at $122.This recovery is based on the assumption that the nation will open up the stimulus taps to improve economic recovery. If that’s the case, then metals, iron ore and coking coal used to manufacture steel will benefit greatly.
Energy commodities also had a good year, with Newcastle thermal coal reaching $252.70 per ton in October 2021. China was the primary driver for this, as it idled a number of its coal mines for safety reasons, which led to decreased output at a time when electricity’s demand was recovering from the coronavirus pandemic. This led traders in China to purchase the available coal-cargo globally, which facilitated an increase in the price of coal.
However, the price has been moderated since India, which is the second largest importer of coal, and China increased domestic output. It is expected that thermal coal will enjoy a solid 2022, if economies across Asia transition to living with the coronavirus successfully.
Despite being the largest importer of crude oil, China’s influence was less noticeable in this commodity, as it only reduced its importing quota. The primary driver of the fuel in 2021 was increasing demand and OPEC exporters supply discipline.
Many expect an economic rebound this year that will result in China purchasing more crude oil, with analysts noting that the coronavirus pandemic’s uncertainty makes experiencing volatility certain.
It would be interesting to be a fly on the wall in the boardrooms of companies such as Asia Broadband Inc. (OTC: AABB) as they hammer out their strategies for coping with the volatility that is likely to unfold in the commodities’ sector.
NOTE TO INVESTORS: The latest news and updates relating to Asia Broadband Inc. (OTC: AABB) are available in the company’s newsroom at https://ibn.fm/AABB
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