CRU Group: Where Macroeconomics Meet Commodities
CRU Group: Where Macroeconomics Meet Commodities
Commodities are crucial to our everyday lives. From the homes we live in, to the energy we use and the food we eat—none of these would be possible without commodities.
Today’s infographic from CRU Group celebrates 50 years of commodities research and charts the prices of the materials that make our world work.
The Importance of Commodities
CRU Group has 50 years of experience in providing business intelligence on the global metals, mining, and fertilizer industries. Regularly analyzing over 50 commodities, here are CRU’s highlights on four key commodities: aluminium, copper, steel, and nitrogen.
Similarly to stocks, commodities are available for sale on the open market, and prices are susceptible to changing economic conditions.
Factors Affecting Commodity Markets
CRU Group has identified five key factors that are currently affecting commodity markets.
- China Stimulus: China’s economy has recently slowed and policy makers are using stimulus to support sustainable economic growth. However, the delivery of stimulus is different from the past, moving away from infrastructure investment and towards tax cuts for businesses and households.
- Recession: Some analysts have been warning of a recession since 2018. When the economy is in decline, commodity sectors feel the downturn more acutely, because industrial production tends to slow down and there is less demand for materials.
- Automotive Tariffs: During 2019, there was a sharp contraction in automotive sales and production, due to the threat of U.S. auto tariffs. However, the main driver is stricter auto emissions standards introduced in Europe and Asia, creating uncertainty for consumers.
- Environment: Governments continue to adopt regulations in response to rising environmental concerns. Green policies will encourage investment in renewable energy infrastructure and electric vehicles, changing the type of minerals required for these technologies.
- Rise of Asia: By 2035, 3.5 billion people will be living in Asian cities, an increase of 47% from today. These growing cities will necessitate large-scale infrastructure projects, which consume vast amounts of resources.
These five factors will drive the economic patterns of key commodities into the future.
Commodities Spotlight
CRU Group has been providing business intelligence on the global metals, mining and fertilizers industries for over 50 years. Regularly analyzing over 50 commodities, CRU highlights four key commodities here:
Aluminium
Aluminium is one of the most in-demand metals in the world by volume, second only to steel. Its lightweight, reflective, ductile and anti-corrosion properties make it the metal of choice for a range of applications. It takes four to five tonnes of bauxite ore to produce one tonne of aluminium.
Copper
Copper plays a huge role in the transition to clean energy. It is a good conductor of heat and electricity, and is also ductile and recyclable. These properties make it a crucial material in electric vehicles and renewable energy infrastructure, as well as electronic goods and construction.
In the past 5,000 years, 550 million tonnes of copper has been produced. To keep up with demand, the world will need the same amount in the next 24 years.
Steel
Steel is lightweight, flexible, tensile, and recyclable. Its versatility and cost-saving benefits make it a preferred material within the construction sector. Demand for steel across various sectors signals growth and is a good indicator of the health of the general economy.
China is responsible for 51% of the world’s steel production, and accounts for 49% of its demand.
Nitrogen
Nitrogen is an odorless, colorless gas that makes up 78% of the earth’s atmosphere by volume. Industrial processes capture ammonia from the air and convert it to other nitrogen compounds. Urea is the most common, and is primarily used as fertilizer. The global nitrogen market is worth $62.8 billion.
Where Next?
How CRU Navigates Complex Commodity Markets
Commodity prices have many different drivers, from supply and demand dynamics to exchange rate movements. Volatility is a common feature to all these commodities and up-to-date pricing and information is critical.
CRU commodity specialists disentangle these forces to interpret and forecast price movements. They apply a range of modelling techniques, as well as their experience and expert judgement.
For 50 years, CRU Group has tracked the commodities that drive the modern world, bringing macroeconomic insights to investors for accurate pricing—and will continue to do so for the next 50 years.
