The Bloomberg Commodity Index, which maps the price development of the 24 most traded commodities, rose 22 percent in response to the war. On the first anniversary of the conflict, however, it is in the red by five percent. Price development was described by XTB analyst Jiří Tyleček.
“There are several factors behind the decline. In addition to the fading effects of war and market adjustment, slowing global economic development plays an important role. On the other hand, developments on the commodity markets are being improved by the opening up of China, which is quickly getting rid of the zero covid policy. Nor can we forget the rise of commodities in anticipation of a war conflict. At the beginning of the war, some commodities were already significantly higher than in the previous months,” said Tyleček.
What is a commodity?
A commodity is a good that is traded on the market without differences in quality and supplies from different suppliers are mutually substitutable. For example, passenger cars, which are produced in many different ways and at different prices, cannot be a commodity. On the contrary, for example, copper is a homogeneous product that can be traded at a uniform price on global markets.
In the original and simplified sense, commodities are products of uniform value and quality produced in large quantities by many different producers.
“Over the past year, most important commodities have been losing. Natural gas recorded a significant decrease. The Dutch monthly TTF contract loses 31 percent. Electricity prices have also been falling from extremes since August. However, the annual contract on the German stock exchange is still growing by ten percent year-on-year. On the contrary, the price of oil is falling. Brent fell by 12 percent and the Texas oil benchmark WTI by 15 percent,” he added.
The price of construction wood on the Chicago Stock Exchange recorded an extreme drop, falling by 70 percent. “According to reports from the market, the situation with wood is also calming down in the Czech Republic,” noted Tyleček. The price of coal in Rotterdam falls by a quarter year-on-year, but it even loses 69 percent from the highs of March 2022.
The prices of industrial metals also show year-on-year lower prices. Among the most traded metals, aluminum showed the most significant decline, whose price fell by a quarter. Copper dropped in price by eight percent.
Precious metals did not escape declines either. “Since the outbreak of the war in Ukraine, gold has fallen four percent to $1,841 per ounce. The yellow metal reached its maximum last year on March 8, when it attacked USD 2,050, to the minimum, to the limit of USD 1,600, and then fell in the fall,” pointed out Gold.plus director Martin Stránský. “Silver has lost 11 percent since the invasion. Palladium recorded a significant decrease of 37 percent, platinum decreased by 12 percent,” added Pavel Řihák, manager of the Golden Gate company.
There was also a drop in prices for agricultural commodities, but not nearly as significant as in the case of energy. The price of cotton drops the most, by a third. Coffee also showed a significant decrease, by 22 percent. The price of wheat fell by four percent, while corn rose by four percent. Most fertilizer price indices shot up after the start of the war, but prices are mostly at lower levels a year after it started. “The American Urea fertilizer price index fell by 40 percent year-on-year,” pointed out Tyleček.
