By Isaac Cohen*
After one of the worst slumps in the first half of this year, due to the pandemic lockdown, the prices of commodities are indicating a reactivation in demand mostly for industrial metals. During this year’s first quarter, commodity producing economies contracted between one fourth and one third, the worst slump since the Great Recession of 2008. Even Australia fell into recession, after almost three decades of sustained prosperity.
The main source of the severe downfall was the contraction of 6.8 percent, between January and March, of the Chinese economy, officially recognized for the first time in almost 50 years. The reason is because China consumes one half of the world production of industrial metals, such as copper, iron ore, nickel, steel and zinc. However, since the second quarter, the Chinese government is implementing an ambitious infrastructure spending program, including bridges, broadband, railroads and utilities. For instance, the Chinese railway state company will double, in the next fifteen years, the extension omf its high-speed rail network, which already is among the longest in the world.
Therefore, the prices of industrial metals are moving upwards. After a fall of around 20 percent in the first quarter, prices of iron ore are up over 40 percent, while copper prices, considered the vanguard of metals, have increased 35 percent since mid-March.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, TELEMUNDO and UNVISION and other media.