Why have the prices of raw materials kept rising in 2021?

If you are engaged in the bulk commodity trading industry, you will find that since the second half of last year, the prices of domestic bulk raw materials have been rising continuously, such as copper, iron ore, crude oil, pulp, sugar, cotton, etc.; especially since this year , The increase is even more obvious. The price of some raw materials even increased by more than 20% within a month, which is a shocking increase.

The ordinary people don’t understand the price changes of raw materials, but they have personal feelings about the price of the terminal. For example, copper is used to make motors, petroleum extracts are the main source of plastics, and iron ore production There are more uses for iron, so the price increase of raw materials will surely drive up the price of terminal commodities.

For example, from the end of December 2020 to the present, the prices of domestic white goods products have risen to varying degrees. For example, many home appliances including TV sets, range hoods, washing machines have increased by more than 10%, and individual products have increased by more than 10%. It even reaches more than 20%. Then why do the prices of raw materials keep rising?

Reasons for price increase

Over-issued currency
Decline in production

Over-issued currency

According to the principles of economics, within a certain period of time, the total amount of goods in society is fixed. If the corresponding amount of money is issued, then the value of goods and money in the entire society is equal. For example, in the current society The value of all commodities is 100 trillion, and the currency issued is also 100 trillion. At this time, 1 yuan = 1 pack of instant noodles; but if the actual amount of currency issued exceeds the actual value of the commodity, inflation (currency depreciation) , Price increases), for example, the value of all commodities in society is 100 trillion, but the currency issued is 200 trillion, then 1 pack of instant noodles = 2 yuan, invisibly, the price of the commodity has risen. The value of the currency drops.

The world’s biggest event in 2020 is the new crown epidemic. After the outbreak, countries have adopted quantitative easing economic stimulus policies and continuously printed money. For example, from the balance sheet data of central banks, only the first half of 2020 will Except for my country's negative growth, the other major economies have positive growth.

In terms of absolute numbers, the U.S. is the first to secure the first place. From the end of January to June, the Fed’s balance sheet expanded by more than 3 trillion U.S. dollars, because the U.S. dollar is the world’s currency. Each of the 7.5 billion people in the world must bleed $400 to rescue American companies and individuals.

Therefore, the over-issued currency of central banks will inevitably lead to the increase in the price of raw materials. Of course, it takes a certain time for the over-issued currency to circulate in the market to affect the terminal. Therefore, the price of raw materials only began to rise in the second half of last year, and the price of terminal commodities It didn't start to rise until the end of the year. This was due to the timeliness of price transmission.

Decline in production

Since the outbreak of the epidemic globally in 2020, except for my country's strong control, other countries are basically still affected by the epidemic. Under the impact of the epidemic, many companies' production have been affected. For example, the automotive chip industry, affected by the epidemic, global chip suppliers ushered in a shortage. CCTV Finance reported twice in January and February 2021 that the shortage of automotive chips was mentioned. The American Bernstein Research Company predicted that in 2021 The global shortage of automotive chips will cause the loss of as many as 4.5 million car production, which is equivalent to nearly 5% of the global annual car production. Therefore, the supply of products in the market is in short supply, which will inevitably lead to an increase in product prices.

Before the epidemic is fully controlled, it can be expected that the prices of raw materials and terminal commodities will continue to rise in 2021.