(Hamburg, August 18, 2021) The HWWI commodity price index rose by an average of 4.1 % in July compared with the previous month and was thus 87.2 % higher than the corresponding monthly figure for the previous year. The increase in the overall index was again driven in particular by the rise in energy commodity prices, especially on coal and natural gas markets. On the markets for industrial raw materials, the positive price trend of recent months did not reappear in July. In particular, prices for lumber recorded a sharp decline in July. Grain prices also fell on average in July compared with the previous month.
Crude oil prices rose slightly on average in July, exceeding the level of the previous month by 1.5 %. Following a price decline in the middle of the month, prices for the European reference grade Brent ended the month at $75 per barrel. Prices for U.S reference grade WTI ended the month at just under $74 per barrel.
The reason for the price drop in the middle of the month was the agreement of the OPEC+ countries, which provides for a continuous increase in oil supply from August onwards. The production of the OPEC+ states is to be expanded monthly by 400,000 barrels per day. This would lift existing production cuts imposed by OPEC+ in spring 2020 to stabilize prices due to the Corona pandemic in September 2022. In addition, increasing uncertainty due to the global spread of the delta virus variant is weighing on crude oil prices. By the end of the month, however, prices on the crude oil markets had risen again slightly.
The markets for coal continued to record strong price increases in July. While South African coal prices rose by an average of 8.7% month-on-month, Australian coal prices increased by as much as 16.4 % on average for the month. As a result, Australian coal prices averaged 179.3 % higher in July than in July last year, approaching their 2008 peak for the first time. South African coal prices are also trading at a high level, exceeding their ten-year high in July. Coal prices in July continued to be driven mainly by robust demand from China. Earlier in the year, a drought in southern China led to outages at hydropower plants, which further boosted Chinese demand for coal. In addition, demand for coal is being supported by the current high prices for natural gas. The increased demand is currently encountering a tight supply of coal, caused on the one hand by the interrupted coal production in Indonesia due to the persistent rainfall and on the other hand by the ongoing supply interruptions of coal producers Russia and South Africa. In addition, the trade conflict between China and Australia continues to affect the coal market, as Australia was a major coal supplier to China prior to the conflict.
Natural gas prices also continued to rise sharply in July. While the U.S. natural gas price increased by an average of 16.4 % for the month, the price of European natural gas increased by another 29.7 % from the previous month. This was the first time the European natural gas price had exceeded its 2005 peak. The significant increase in demand due to the global recovery from the recession triggered by the Corona pandemic continues to be offset by a short supply of natural gas. In Europe, the long winter led to empty inventories, and Russia supplied less natural gas. In the U.S., natural gas supply in July was also still below crisis levels as the drop in prices on crude oil markets last year also affected gas production. Natural gas is a by-product of U.S. shale oil production, which has been reduced in part in response to the drop in prices on the crude oil market.
Overall, the index for energy raw materials rose by 5.6 % (euro basis: 7.6 %) to 149.5 points (euro basis: 140.3 points).
The subindex for industrial raw materials is divided into the index for agricultural raw materials, the index for nonferrous metals and the index for iron ore and steel scrap.
The sub-indices for nonferrous metals and iron ore and steel scrap increased slightly on average compared with the previous month. While prices for tin, nickel, aluminum, and lead increased in July compared with the previous month, prices for copper and zinc decreased slightly. On the supply side, the price increase on the tin and aluminum markets was partly due to the drought in China. Due to the decline in hydropower production, some Chinese aluminum and tin smelters had to be closed temporarily. In addition to weakened supply, rising demand for aluminum and tin also drove prices. Tin demand benefited from consumer electronics, which have boomed since the global lockdown. The spread of the delta virus variant, which is now also appearing in China, raises fears of renewed supply problems for metals such as tin from Asia.
Copper and zinc prices, on the other hand, fell slightly in July, also responding to uncertainty associated with rising infection rates in the USA, Europe and China and growing concerns about the global economic recovery.
Iron ore prices rose slightly on average in July from the previous month, and steel scrap prices fell slightly. After production interruptions at some mines during the pandemic, iron ore supply is slowly expanding again. Chinese iron ore imports are currently declining as the Chinese government plans to curb steel production in the second half of the year to reduce emissions.
In July, the index for agricultural raw materials fell in July from the previous month, reflecting the huge drop in lumber prices. Lumber prices, which reached highs in May, recorded sharp price declines for the second month in a row. The high prices ensured that sawmill capacity was expanded in the USA, Canada, and Europe. Demand, on the other hand, decreased as private construction projects were postponed due to the high prices. The combination of expanded supply and slowed demand caused prices to fall sharply.
Overall, the index for industrial raw materials fell by a monthly average of 4.2 % (euro basis: 2.3 %) to 212.6 points (euro basis: 199.7 points).
The index for food and beverages rose by an average of 0.1 % in July compared with the previous month. While the sub-indices for grains and for oilseeds and oils recorded price declines compared with the previous month, the sub-index for luxury foods rose on average for the month.
Grain prices continued to decline in July from the previous month, due in particular to price declines for corn and rice. Corn prices fell due to improved production prospects in the U.S. and Argentina. In addition, China reduced its import orders. Rice prices also fell in response to good crop forecasts and reached a two-year low. In contrast, barley and wheat prices rose on average in July, reflecting concerns about tight supplies in the future due to the current drought in North America and heavy rains in Europe.
While coconut and sunflower oil prices declined slightly, palm oil markets saw price increases. The increased prices for palm oil were due to a tightening of supply from Malaysia and increased demand from India.
The index for luxury foods increased on average in July compared with the previous month. In particular, coffee and sugar prices increased from the previous month and continued to be affected by unfavorable weather conditions in harvesting regions in July. A prolonged drought was followed by frost in key Brazilian growing regions, which could affect future coffee and sugar harvests. Sugar prices are also benefiting from stable crude oil prices, as sugar cane is used as a raw material for biofuel production.
Overall, the index for food and beverages rose by a monthly average of 0.1 % (euro basis: + 2,1 %) and stood at 130.1 points (euro basis: 122.0 points).
The HWWI Commodity Price Index is a comprehensive, weekly calculated indicator of price
developments in world commodity markets, which includes the major internationally traded commodities. Since 1960, the HWWI Commodity Price Index measures the price changes in the raw material import calculation of the industrialized countries and is thus an indicator for the cost development of imported raw materials and serves among other things central banks, research institutes and international institutions for their analyses.