Commodity crisis: where you are

The upward trend in the price of materials such as copper has been taking place especially since the second half of 2020, although it has increased even more since the beginning of 2021.

The prices of the copper, aluminum, plastic materials, steel or zinc keep going up. In some cases, the increase is more than 60 %, so the cost of some of these raw materials, essential for the manufacture of many of the products sold in hardware stores and DIY centers, is already in all-time highs.

Although its price is fluctuating, according to the latest data provided by FACEL (the Spanish association of manufacturers of insulated electrical and fiber optic cables and conductors) the price of copper is up more than 62 % since May 2020, and that of aluminum, a 45 %. 

Commodities had long fallen out of favor with investors, but have recently hit a hot streak, even outperforming equity indices for the first time in many years. Increasing demand for raw materials from China, control of supply in the oil sector, as well as government commitments to maintain fiscal economic support, have contributed to an increase in the price of raw materials.

The plastic materials, whose cost is linked to the evolution of the price of oil, are registering a similar trend: polyethylenes have increased by almost 30 % compared to the 2020 average, and PVC, in almost a 32%. These increases have accelerated remarkably in the last two or three months.

For its part, the PVC market continues to show a tense behavior throughout the European Union. As explained by FACEL, domestic demand is robust, with insignificant imports, and exports from the EU may currently be attractive. “Inventories are weak, since demand in December 2020 was stronger than expected,” they clarify. Finally, other raw materials such as steel and zinc have experienced rises of more than 40 %.

This upward trend has been taking place especially since the second half of 2020, although has increased even more since the beginning of 2021, according to the analysis carried out by FACEL.

"This crisis - they explain from the association - is the result of a strong economic recovery with high growth prospects sustained, both in Asia (particularly in the Far East, with China, the world's largest consumer of raw materials, in the lead) as in USA, for the stimulus packages of the new Biden Administration.” In China, specifically, growth of 7.5 1Q3T is expected in 2021.

To put the figures in context, it should be explained that this increase in the price of raw materials, which will inevitably affect the final price of certain productss.

Also the DIY and Hardware Manufacturers Association showed his concern a few weeks ago. In fact, in a survey carried out by AFEB in which 44 companies of the association participated, 93 % of them reported that they were experiencing cost increases due precisely to the increase in raw material prices and / or import costs. Almost 82 % of those surveyed anticipated, already then, a price increase in 2021 due to those two factors.