Global commodities prices predicted to rise 40%

JPMorgan Chase & Co has predicted that global commodity prices, including metals, crude oil, wheat, and more, could rise 40% or more, stemming from the sanctions against Russia. 

The market uncertainty means investors could boost their allocation to commodity metals during rising inflation, which “would imply another 30% to 40% upside for commodities from here,” JPMorgan noted. But while allocations seem to be higher than average on commodities, they are not very overweight, according to strategists led by Nikolaos Panigirtzoglou at JPMorgan.

For over a month now, commodity prices have been seesawing back and forth due to the increased demand stemming from the Russia-Ukraine conflict. Commodities soared to record highs last month. 

Palladium reached US$3,440 in early March amid fears of supply disruptions. And as of April 26, palladium is priced at US$2,172.

The rise in commodity prices and raw materials from recent global events has only contributed to the record-high inflation levels witnessed worldwide, prompting a tougher response from the Federal Reserve. For example, in a recent IMF-hosted panel late last week, Fed Chair Jerome Powell explained that, alongside other officials, multiple “50 basis points will be on the table for the May meeting.” With this, the weighting of assets between stocks, bonds and raw materials in investor portfolios continues to reshuffle. 

“In the current juncture, where the need for inflation hedges is more elevated, it is conceivable to see longer-term commodity allocations eventually rising above 1% of total financial assets globally, surpassing the previous highs,” said the JPMorgan strategists.

Prices of lithium have nearly doubled this year, according to Benchmark Mineral Intelligence. As the vital component in batteries of electric vehicles (EV), demand continues to rise as supply trails. 

With increased sales of EVs and new energy vehicles (NEV) in China jumping 157.5% to 3.52 million units in 2021, Benchmark Mineral Intelligence reported that battery-grade lithium carbonate is averaging US$76,700 a tonne, up 10% over just two weeks and 95% since the beginning of 2022. One year ago, this commodity was trading at just US$13,400 a tonne.

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