Due to the Russia-Ukraine war and rising energy prices, a record-breaking record was broken in commodity prices, especially in the first quarter of 2022. One of the most important reasons for this is that Russia is among the leading countries in the production of energy, agricultural commodities and metals, while rising energy costs and the sanctions imposed on Russia also played an important role in these increases. Restrictions and protectionist policies applied to countries’ industrial products, especially food exports, also caused sharp fluctuations. Only geopolitical risks and concerns about supply were not effective in the commodity market. Many products and instruments traded in the commodity market ended the year with a decline, despite seeing historic highs or 10-year highs in 2022. Factors that suppress commodities Despite the fierce conflicts in the Russia-Ukraine war, the ongoing concerns about the Kovid-19 outbreak in China, the tightening policies of the central banks, especially the US Federal Reserve (Fed), the recession concerns and the increase in the demand for the dollar suppressed commodities last year. Geopolitical risks and supply problems pushed commodity prices up, while the Kovid-19 outbreak, banks’ tight monetary policies and concerns about the recession in the global economy pushed prices down. The volatility in the commodity market, along with the difficulty in pricing, brought along concerns about economic activity. While the risk of recession for the US economy has strengthened this year, concerns have also escalated that the aggressive monetary policy to combat the highest inflation in the last 40 years will put the country into recession. In the face of high inflation, the stance of leading central banks that they will do whatever is necessary despite the possibility of countries going into recession also eroded the appetite in the commodity market. The natural gas crisis with Russia also brought countries face to face with recession. Copper and cotton were the two main indicators of the global economy. In the commodity market, product-based divergences were noted in 2022. Especially copper on the metal side and cotton on the agriculture side were the two commodities that are the main indicators of the global economy. In some periods, when geopolitical risks and supply shortages increased commodity prices, there were decreases in copper and cotton due to recession concerns. Meanwhile, in Peru, which is one of the leading countries in copper production, there were periods when the protests of the local people against the Las Bambas mine had an upward effect on copper prices. Looking at precious metals, especially the Fed’s policies suppressed gold and palladium, while silver and platinum rose. The fact that palladium, which saw its historical peak with the start of the Russia-Ukraine war, closed 2022 with a decline reveals the uncertainty in the pricing in the commodity market, one of the reasons for the decline in palladium was that automotive manufacturers turned to platinum due to the rise in prices. Nickel was the most affected by the said fluctuation. With the strengthening of speculative transactions as well as supply problems, the trading queue of nickel, which increased by more than 100 percent in the London Metal Exchange (LME) and tested the levels of 100 thousand dollars, stopped on March 8. After this intervention by the LME, hard movements were seen in nickel throughout the year. With the sharp rises in nickel prices, companies producing electric vehicles began to seek solutions to reduce their costs. The factors causing the fluctuations continue to affect Although there was a relief in the commodity market in the last period of the year, with the optimistic statements of Fed Chairman Jerome Powell and the news that China may soften its Kovid-19 policy, the fluctuations in question continued. The factors causing the fluctuations continue to affect. After the Fed, the European Central Bank (ECB) and the Bank of England (BoE) continued their “hawk” stance despite the reduction in the tightening speed, causing the sharp fluctuations in the commodity market to continue. Last year, a mixed trend was observed in precious metals. An ounce of gold, which saw its highest level since August 2020 with $2,070,40, later dropped and closed the year with a 0.3 percent decline. Palladium, which saw its historical peak at $3,435.50 in 2021, declined by 5.9 percent. Silver gained 2.9 percent and platinum 11 percent last year. Gold, which rose as a “safe haven” with the start of the Russia-Ukraine war, declined with the rhetoric that central banks’ interest rate hikes would continue. Palladium, which has an important place in semiconductor chip production as a result of the disruption in the global supply chain caused by the war, and 40 percent of it is found in Russia globally; first a hard and then a downward trend was observed. Analysts said demand for palladium has seen a historic high and there has been a shift in the global industry to cheaper commodities. Silver prices rose as the demand for renewable energy increased. Silver has an important place in the construction of solar panels. Negative trend in metals Last year, a negative trend dominated metals. The pound of copper, which saw its historical peak at $4,9059, decreased by 14.3 percent. In the over-the-counter market, aluminum lost 8 percent and zinc lost 15.5 percent, while lead rose 1.3 percent and nickel increased 45 percent. Russia has an important role in the global metal supply. Despite the problems experienced in metals as a result of geopolitical risks and supply problems, concerns about global economic activity outweighed. Analysts said that despite the problems in supply as a result of the closure or interruption of production in smelters in Europe, the demand side was adversely affected as the production of these plants was interrupted. Sharp rises were seen in energy commodities Energy commodities saw sharp increases last year. On the energy side, the problems regarding supply and supply did not lose their effect. The barrel price of Brent oil, which exceeded the level of 139 dollars on March 7 due to the supply concerns caused by the Russia-Ukraine war in the markets, closed the year at the level of 84 dollars as the global recession concerns in the markets strengthened and demand concerns regained ground. Brent oil finished the year with an increase of 8.4 percent. On the other hand, natural gas traded on the New York Mercantile Exchange, which reached its highest level in 14 years by exceeding 10 dollars, increased by 20 percent. One of the factors affecting the increase in natural gas prices was determined as the predictions that the air temperatures will decrease. Concerns that rail workers might go on strike in the USA, and problems at Freeport LNG’s Texas LNG export facility also caused natural gas to rise. During the year, Gazprom announced that it did not have the necessary documents to return a critical Siemens turbine engine, repaired in Canada, to Russia, so they could not guarantee gas flow. The news flow that Gazprom stopped natural gas shipments to Bulgaria and Poland because they did not comply with the ruble payment system also affected natural gas prices upwards. Concerns about production in agricultural commodities came to the fore With the start of the Russia-Ukraine war, concerns about production in agricultural commodities came to the fore. A year has passed in which the rises in agricultural commodities were dominant. Wheat traded on the Chicago Mercantile Exchange peaked at $13,6350, corn at $8,2450 since August 2012, and soybeans at $17.5925, the highest since September 2012. Last year, wheat increased 2.6 percent, corn 14.4 percent, soybeans 13.8 percent and rice 25.5 percent. While the Russian-Ukrainian war brought supply problems to the agenda and the impact of rising energy prices, wheat saw its historical peak, the fact that Ukraine and Russia, the two largest wheat exporters in the Black Sea region, were at war, increased the concerns that wheat and corn exports would come to a standstill. Wheat prices finished the year with a rise, although some of their gains were given back by Russia’s return to the grain agreement. The fact that planting and harvesting in Ukraine came to a standstill due to the negative impact of planting and the cold wave in the USA slowed the planting process, which also affected corn prices upwards. Rising fertilizer prices had an upward impact on soybean prices. Sugar, which saw its highest level since February 2017 with $ 0.2118, gained 6.2 percent in 2022. Cotton, which saw its highest level since May 2011 with 1.5595 dollars, gave back its gains and closed the year with a 25.9 percent depreciation. Coffee, which saw its highest level since September 2011 with $ 2,6045, returned its gains and ended 2022 with a decrease of 26.1 percent. Although there were peaks in cotton prices due to the increase in exports in the USA, especially the recession concerns in the global economy affected cotton prices downwards. Concerns that demand will increase, especially with the relaxation of Kovid-19 measures in China and the change of government in Brazil, increased sugar prices. Coffee prices, which increased due to the unfavorable weather conditions in South America, decreased with the expectations of a surplus production later on. Cocoa rose 2.9 percent last year. Concerns about production in Ivory Coast caused cocoa prices to rise. Meanwhile, there may be different dynamics in agricultural commodities affected by weather conditions. For example, the change of government in Brazil had a positive impact on sugar prices.
A professional writer by day, a tech-nerd by night, with a love for all things money.