In October last year, Goldman Sachs published a report stating that commodities would usher in a structural bull market in 2021; China Merchants Securities also predicted in mid-December that the market would usher in a nine-year commodity bull market; JPMorgan Chase is more optimistic, recently claiming that commodities, especially crude oil, have entered a super cycle that will last for several years. In addition, sellers such as Bank of America Merrill Lynch and Citigroup, as well as buy-side institutions such as Ospraie Management LLC, have successively expressed bullish views.
From the beginning of this year to February 13, even the Russell 2000 index, which rose 16% during the year, did not outperform crude oil. As soon as the Spring Festival begins, commodities such as crude oil, PTA, and ethylene glycol all begin to surge.
And the bull market here may have just begun!
On February 22, the market revealed that Goldman Sachs once again boldly predicted that Brent crude oil prices would reach US$70/barrel in the second quarter and US$75/barrel in the third quarter.
On the other hand, the “nuclear-powered money printing machine” in the United States is about to start again, flooding the country with a flood of 1.9 trillion U.S. dollars. Recently, U.S. President-elect Biden announced a An economic stimulus package worth US$1.9 trillion is designed to deal with the impact of the epidemic on households and businesses. The “American Rescue Plan” released by Biden will include about $400 billion in fighting the epidemic, about $1 trillion in economic relief for American families, and about $440 billion in relief for small businesses, state and local governments, etc. Provide assistance.
Under the influence of the new coronavirus epidemic, the United States has caused huge losses to the national economy due to its inability to fight the epidemic and the hollowing out of industries. However, due to the international Because of its special status, it can “print money” to “transfuse blood” to the domestic people.
Is the super cycle of global inflation and commodities coming?
Commodity is the most obvious procyclical product. The global economic downturn or recession will definitely impact commodity prices, while economic recovery often drives up commodity prices.
The logic of commodities can be expressed by a simple formula: weak dollar + wide credit + strong recovery = commodity bull.
After World War II, the United States controlled the vast majority of the world’s gold and became the absolute talker of finance and trade under the gold standard. This is a major feature of the US dollar’s hegemony left over from history. That is – pricing power. In the 50 years since the collapse of the Bretton Woods system, international commodities have still maintained the “tradition” of using US dollars as the unit of pricing.
Therefore, there is the so-called “seesaw effect” between the two: when the dollar depreciates, the external value of the commodity based on it remains unchanged while its value remains unchanged. Prices will rise and vice versa.
The loose monetary environment will naturally bring about an increase in prices. In January 2021, the inflation rate in the Eurozone rose from -0.3% to 0.9%; in early February, the market was optimistic about the U.S. Inflation expectations for the next year are 3.3%, a six-and-a-half-year high since July 2014. It should be noted that the traditional inflation judgment standard is mainly based on consumers, and the price measurement coverage of investments and assets is relatively small, which will lead to distortion. If the price index of the stock market and real estate is included, the inflation rate will only be higher but not lower.
In other words, the oversold rebound in commodities is generally a product of global inflation.
In addition, as the epidemic is gradually controlled and vaccination becomes more popular, economic recovery will have a great impact on the supply and demand of commodities. For example, the recovery of the aviation industry will increase the demand for crude oil, and the resumption of production of industries in various countries will increase the demand for raw materials.
Textile raw material prices have experienced an “inflationary” rise
In the United States, the US$1.9 trillion water After it is poured into the market, it will inevitably bring great inflation risks to the market, which will be reflected in the textile market as an increase in raw material prices.
In fact, starting from the second half of 2020, due to “imported inflation”, the prices of various raw materials in the textile market have begun to rise, and the price of polyester filament has increased by more than 1,000 yuan. / ton, spandex has increased by more than 10,000 yuan / ton, viscose staple fiber has increased by 1,000 yuan / ton, and acrylic staple fiber has increased by 400 yuan / ton, making textile people unable to bear it. According to incomplete statistics, since February, due to the continued rise in prices of upstream raw materials, nearly a hundred companies have collectively announced price increases, involving dozens of chemical fiber raw material products such as viscose, polyester yarn, spandex, nylon, and dyes.
At the same time, the dynamics of the bulk textile raw material industry under the epidemic in 2020 have surprised everyone, and the beginning of 2021 has also continued this unpredictable trend. The extremely cold weather in the United States and other places has pushed international crude oil to soar to a 13-month high. Under force majeure, chemical giants such as Exxon Mobil, Chevron Phillips Chemical Company, and Marathon Petroleum Company have shut down equipment or even suspended production. Cold wave weather has led to a reduction in U.S. crude oil production. European and American vaccines are actively promoting, and international oil prices continue to rise. U.S. commercial crude oil inventories have dropped sharply. Vaccines and the U.S. economic stimulus plan continue to boost demand expectations. The tight supply situation has inevitably pushed up the prices of bulk textile raw materials. .
But history always repeats itself, just not simply.
Now it seems like we have returned to more than ten years ago. From metallic copper to cotton, from crude oil to food, global commodity prices are rising sharply. The comprehensive commodity index has reached a level rarely seen in six years. At a high price level, oil prices are already 64% higher than last November.
Whether it is the effects caused by the outbreak of the crisis or the response methods of various countries, it is actually not much different from before. It supports the market by creating an easy liquidity environment. In the context of global credit expansion, investment and consumption will not stop here and the economy will completely regain lost ground, but will continue to promote the start of an economic upward cycle and drive commodities higher.
There is a high probability that the raw material market in 2021 will be a continuation of the second half of 2020. Driven by capital speculation and downstream demand, the raw material price increase in 2021 has arrived early. , which also caught the downstream textile companies off guard. If the prices of upstream raw materials continue to rise, downstream textile companies are bound to see a new round of price increases. </p
