CRU Group: Where Macroeconomics Meet Commodities
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CRU Group: Where Macroeconomics Meet Commodities

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The following content is sponsored by CRU Group.

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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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

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Visualizing Raw Material Inflation in Canada

Over the last year, raw material inflation in Canada was 37%. Which material prices jumped the most, and how does this impact manufacturers?

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Spiral bar chart showing raw material inflation in Canada from May 2021 to May 2022. Crude energy products such as coal and crude oil had the highest inflation rates.

Raw Material Inflation in Canada

Inflation in Canada is climbing, and it has impacted the raw materials manufacturers use to produce goods. In fact, raw material prices have climbed 37% year-over-year on average.

More than half of manufacturers say this is one of their top challenges. In this graphic from Canadian Manufacturers & Exporters (CME), we show which materials have seen the biggest price spikes over the last year.

Inflation by Raw Material

The table below shows the rate of inflation in Canada for select raw materials from May 2021 to May 2022.

Raw MaterialCategoryPrice Change
(May 2021-May 2022)
CoalCrude Energy95.2%
Crude Oil & BitumenCrude Energy85.0%
WheatCrops73.4%
Natural GasCrude Energy50.3%
Beans, Peas, & LentilsCrops43.3%
Logs & Forestry ProductsForestry Products & Natural Rubber42.1%
Scrap MetalMetal Ores & Scrap40.3%
Canola/RapeseedCrops30.6%
PotashNon-metallic Minerals24.7%
Fish & Fishery ProductsAnimal Products23.7%
Lead & Zinc OresMetal Ores & Scrap21.2%
Cattle & CalvesAnimal Products10.2%
Eggs in ShellAnimal Products8.4%
PoultryAnimal Products8.3%
Sand, Gravel, & ClayNon-metallic Minerals8.1%
Fresh Fruit & NutsCrops8.0%
Nickel OresMetal Ores & Scrap5.8%
Tin, Iron Alloys, & Other OresMetal Ores & Scrap3.3%
Gold OresMetal Ores & Scrap2.1%
Natural RubberForestry Products & Natural Rubber1.4%

Crude energy materials led the rise, with the price of coal nearly doubling over the last year. Oil and natural gas prices also rose amid war-related supply constraints and higher demand as people got back to pre-pandemic activities. This has far-reaching consequences for manufacturers given that oil and gas is widely used for transportation and heat, and is an input in thousands of products.

Wheat inflation in Canada reached 73.4%. The cost increase was partly due to a drought in Western Canada that reduced Canadian wheat production by nearly 40% from 2020 to 2021. Internationally, the Russia-Ukraine conflict also threatened wheat supply as the two countries normally account for almost a third of global wheat exports. Wheat inflation has affected food and fuel manufacturers the most, as it is used for livestock feed, biofuels, and a wide range of human food.

Simultaneously, the price of lumber increased by 42.1% because of an increased demand for housing, and flooding in British Columbia that reduced supply. This affects manufacturers who produce things like timber and plywood, and ultimately influences the cost of housing.

How Inflation in Canada Affects Manufacturers

Raw material inflation drives up manufacturers’ cost of doing business. Unfortunately, it isn’t the only price pressure they face. Ocean shipping costs are more than five times higher compared to when the pandemic began. Truck transportation costs rose by 15% from March 2021 to March 2022, based on the latest available data.

On top of this, manufacturers have to contend with supply chain disruptions, global uncertainty, and labor shortages. What can manufacturers do? A majority of manufacturers have been raising prices to pass on some of the additional costs to consumers.

Response to Supply Chain Challenges% of Manufacturers 
Increase prices80%
Delay fulfilling customer orders79%
Find alternative supplier of raw materials and other inputs69%
Increase inventories63%
Cut production30%
Lay off workers9%
Other7%

Over the longer term, manufacturers say they plan to build stronger relationships with customers and suppliers, source critical raw materials from two suppliers, and bring their supplier base and production closer to home.

Looking ahead, most manufacturers say they expect supply chain issues to be resolved some time in 2023—though they were last asked this question before the war in Ukraine began. The Bank of Canada also expects inflation in Canada to ease in the second half of 2023. In the meantime, manufacturers will be forced to adapt to rising costs.

Learn more about how CME helps manufacturers grow at home and abroad through programs, services, and advocacy.

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Operational Health Tech: A New Billion Dollar Market

Operational health tech is poised to be a multi-billion dollar industry. This graphic breaks down how its disrupting healthcare as we know it.

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Operational Health Tech: A New Billion Dollar Market

Many lessons were learned throughout the COVID-19 pandemic, but what has become most apparent is the need to invest in healthcare on all fronts. In fact in just a few short years, businesses, governments, and consumers have had to entirely reassess healthcare in ways not quite seen before.

What’s more, this elevated importance placed on health could be here to stay, and one area in particular is poised for significant growth: operational health tech.

The graphic above from our sponsor Bloom Health Partners dives into the burgeoning market that is operational health tech, and reveals the key driving forces behind it.

What is Operational Health?

To start, operational health is an industry that provides health services to employees to help keep companies running smoothly.

A critical piece of operational health is workplace health, which is expected to soar in value. From 2021 to 2025, the market for workplace health is expected to grow 200% from $6.5 billion to $19.5 billion.

The industry is undergoing a tremendous amount of innovation, specifically in relation to technological advances.

Operational Health Tech: Disrupting Healthcare

The operational health tech industry is disrupting traditional healthcare by providing direct services to employees in the workplace.

For decades now, the U.S. has increasingly become a statistical outlier for healthcare spending relative to health outcomes. For instance, the average American incurs $9,000 in healthcare spending per year, nearly twice that of OECD countries, yet life expectancy is flatlining while other countries see rises.

A worsening and increasingly expensive health dynamic makes the environment ripe for disruption and is allowing for new ideas to be brought to the table.

In addition, people are already responding to these inefficient practices by shifting greater emphasis on health within the job market. For example, studies show that workers care more about healthcare benefits over the salaries when choosing an employer.

Going forward, employees will gravitate towards employers that provide standout health benefits like workplace healthcare options offered by operational health. Here are some additional factors that act as catalysts for this space.

1. Healthcare as Smart Business

What do companies that rank as some of the best to work for have in common? First, they all tend to outperform relative to the S&P 500 on a cumulative stock performance basis. Second, many offer superior healthcare benefits.

Moreover, from 2012 to 2022, companies that were the best to work for saw shares appreciate nearly 500%, compared to around 300% for the broader market. Data like this suggests investing in healthcare and keeping employees happy is smart business that pays dividends.

2. Healthcare as a Differentiator

Since 2020, labor markets have changed dramatically. As a result, employees now have more options and are much more selective about where they work. This is evident from the difference between job openings and hires which has risen to unrecognizable levels. For example, the data shows that there are nearly 12 million job openings, but only around 6-7 million hires in 2022.

Altogether, with an oversupply of jobs relative to workers, employers will have to find new ways to differentiate. One way to stand out is through healthcare and initiatives around operational health tech.

3. The Looming Mental Health Epidemic

Today some 700 million people suffer from some form of a mental health condition and COVID-19 has continued to exacerbate the problem.

Moreover, the cost of mental health for the global economy is estimated to be a whopping $6 trillion by 2030, over double compared to the $2.5 trillion figure in 2010.

Under the umbrella of services operational health tech covers, mental health will stand to benefit. Especially in the years to come as we look for new ways to combat its mounting costs.

Investing in Operational Health Tech

Bloom Health Partners is an operational health tech company looking to revolutionize workplace health by supplying employers with data to better understand their employee base and business.

One way Bloom stands out is with Bloom Shield—its flagship cloud-based big data platform for employee health data management. With Bloom Shield, new health insights become available to make better decisions. Employers can get insight into demographic data and age trends within the workplace, pre-screening detection for cancer and diabetes, and testing for management to tackle the spread of disease.

Click here to learn more about investing in operational health tech with Bloom Health Partners.

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