August 20, 2021 – Prices on the commodity exchanges have fallen yesterday. And once again, one can observe how easily commodity exchanges and foreign exchange trading can be artificially influenced. The summer slump is used as an amplifier and the undersupplied media landscape is instrumentalized as a willing medium for this purpose. Because bad news, are as well known good news. The play with the fear.

Focus: How to make commodity market prices go downhill
Focus: How to make commodity market prices go downhill

What happened in the first place?

Up-to-date and at first glance, nothing at all. If the economic data from the United States and the European region were just as good as they were at the time of the German economic miracle, the most unimportant indices are still being eagerly used to stall the purring engine.

A little spiced with not so top data from China. And unconfirmed rumors that quite possibly the U.S. Fed could change its monetary policy in September 2021 – about which there has been repeated speculation in recent months and in the end nothing happened. In the current Fed records, by the way, the monetary guardians could not agree again on whether they should change anything at all.

Even good news can be bad for the stock market prices

We have been able to observe this more often this year now. For example, when the Chinese group Tsingshan triggered a price slide in nickel with a single press release and nothing else happened until today. Much to the delight of nickel speculators and buyers, who could suddenly cover their nickel needs a few thousand dollars cheaper per ton. A rogue who thinks evil thereby.

Currency pair euro dollar must currently hold out

The euro-dollar exchange rate has been bobbing around for almost a year in the vicinity of 1.17 $ to 1 euro. Hardly it moves once somewhat under it, the experts jump to dozens from the summer hole and write the decline of the exchange rate here and speculate on possible new lows. It’s just stupid when the exchange rate doesn’t follow suit.

Our favorite question comes up: Who benefits?

So we ask the question again: Who could benefit from the fact that commodity prices are falling? To explain this in more detail, let’s take a little trip out of the world of stainless steel and metal commodities. We’d like to take a look at the most obvious example: Cryptocurrencies and Elon Musk.

Elon Musk tweets and the crypto world goes down

When Elon Musk reaches for his smartphone and tweets a crude line about the bleak future of cryptocurrencies, billions of US dollars in Bitcoin, Ethereum or Dogecoin go down the drain on crypto exchanges. This can also be justified with the high pollution caused by all the crypto server farms that produce all the coins in the first place. The arguments are interchangeable. The main thing is that they come from a celebrity who happens to have invested a not inconsiderable portion of his company capital in cryptocurrencies.

Cryptos down, cheap buying spree starts, next tweet.

Shortly thereafter, after everyone has panicked and moved or sold their coins, the next crude tweet pops up and e.g. Dogecoin subsequently jumps up by almost 10%. That’s only a few dollar cents after the decimal point, you might think, but here it’s the masses that do it. If you have 2 billion U.S. dollars in Dogecoins for example, then that’s a plus of about 200 million U.S. dollars.

Nickel: A bit more subtle, but with a similar effect

Something more subtle happened with nickel this year, as mentioned above. A major corporation launched a press release suggesting that a major problem in battery production for electric vehicles had been solved. Nickel, which at the time was trading at highs of over $20,000 per ton and was widely believed to be a very scarce commodity, was sent plummeting on fears that there might be too much of it.

Commodities again sought after as speculative assets after price crash

Even at the time of the nickel crash in March 2021, little had changed in the general global situation. Only a few words had been let loose. And after the initial shock was over, an unprecedented rally in commodities and prices got underway, the likes of which the world had probably never seen before.

Raw material scarcity still dominates the market

The world is currently recovering from the Corona pandemic, and even though it is not yet completely over, a huge investment backlog has built up. Europe and the United States in particular have extensive catch-up needs – also in connection with the green transformation.

The whole world needs stainless steel, cement, aluminum

Steel and stainless steel have been in short supply for months. Cement, wood and other building materials are hard to come by. Things don’t look any better for plastics and aluminum. Commodity prices are generally at their highest levels in years or decades.

Material for infrastructure programs not really available

Huge infrastructure programs are either in the legislative process or have already been started. And the necessary material for them is already being planned, even if it has not yet been produced.

Market protection measures and difficult container logistics

Market protection measures and problems in the worldwide container logistics, add to this. We have not even begun to talk about the labor market situation. There is a shortage of workers everywhere. It seems like a mockery when full employment has not yet been reached and is used as a reason for “bad” labor market data – but entrepreneurs still can’t find qualified employees (because there aren’t any).

China wants to aim high and protect its raw materials

And then there is China. The government of the world’s most populous country has been trying for months to contain the galloping economy. In the process, it is struggling with energy problems and pollution and an increasingly emancipating economy that wants to make a profit.

Commodity exports are problem for China

The fact that millions of tons of important products, such as steel, aluminum or cement, are withdrawn from the domestic market and then sold on the international market is a thorn in the side of the state power.

This means that there is a shortage of important raw materials and primary products on the domestic market, which drives up prices and makes higher-quality Chinese products more expensive on the world market. This, in turn, is bad for competitiveness.

China simply reaches for the regulatory hammer

Then laws are passed and measures are taken to steer this behavior in a new direction and to bring domestic prices down. Sometimes with more, sometimes with less success. Nonetheless, this has a greater impact on the global market than one might see at first glance.

Europe and the United States hardest hit by stainless steel shortages

Which brings us back to stainless steel. Because stainless steel is in short supply. Very scarce, in fact. European and U.S. stainless steel producers are either running at capacity or simply don’t want to produce any more so as not to jeopardize margins and keep prices high.

At the same time, the lobby groups are trying to push through more and more market protection measures, using even the most outrageous tricks, and are finding grateful customers for their theories in the overtaxed governments. So they don’t have to think for themselves or even write laws themselves. And China is taking more and more stainless steel off the market.

Stainless steel availability not positively influenced by Chinese measures

This may have a short-term effect on the raw material prices for stainless steel production, as China no longer demands so much, but it will not fundamentally change the availability of stainless steel for the time being. If anything, there will be even less material available than before. And it will remain a supplier market with artificially tight availability.

When fear is used to speculate

In the end, the market is influenced by the fear of possible changes, artificially inflated and supposedly bad and sometimes good news. So you get again room for new speculations and in the end the prices for raw materials are even higher than they are currently already. Because nothing has really changed. But even an increase or decrease of 0.1% can make billions in speculative profits for certain values.

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