From S&P Global Platts, January 10:
We kick off this year's Commodity Tracker series with a look at voluntary carbon prices as well as the correlation between commodities and inflation. The unrest in Kazakhstan, oil demand growth, metallurgical coal supply and Henry Hub prices are also in focus.
.... 2. US inflation and commodities in 2022
What's happening? Commodities in 2021 gained 37% as measured by the GSCI broad index, with energy commodities gaining 54%. Iron ore and precious metals lagged and declined on year 23% and 4%, respectively. Commodity improvement was driven by the continuing rebound in economic growth, which globally was about 5.7% on year, along with a continuing rise in implied inflation (measured as the difference between US, 10-year treasuries and 10-year treasury inflation protected security rates, or TIPS). Global central banks are increasingly tightening monetary policies to address inflation concerns.
What's next? Commodity performance in 2022 will be driven by the fundamental balances within each product grouping. Demand for commodities will continue to normalize from the pandemic though the pace of improvement will slow from that seen in 2021, with global GDP growth slowing to 4.2%. Against this backdrop, inflation trends remain elevated, but may be near peaking. Energy price pressures also remain elevated but the year-on-year pressure will ease, even if short-term prices stabilize. The pace of monetary policy tightening remains problematic, but the degree of accommodation will decrease from what was provided during the pandemic in 2020 and 2021. Implied inflation trends may ease, which would be a headwind for commodities....
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