These Were The Top Ten Commodities Of 2021
Year 2021 was a year of rebound for most economic segments, including commodities. Several analysts now expect a record commodity bull market this year. Such expectations are backed by both...
Year 2021 was a year of rebound for most economic segments, including commodities. Several analysts now expect a record commodity bull market this year. Such expectations are backed by both technical and fundamental reasons. Supply chain disruptions and surging inflation are contributing to this rally as well. Let's take a look at the top ten commodities of 2021.
Top Ten Commodities Of 2021
We used the percentage price change of commodities last year to rank the top ten commodities of 2021. Following are the top ten commodities of 2021:
Crude Oil (>57%)
Rising vaccination rates, easing pandemic-related restrictions, and global rebound resulted in a steep rise in the global petroleum demand. The spot price of Brent crude oil was at $50 per barrel at the start of 2021, but increased to $86 per barrel in late October. However, the prices dropped in the final weeks of the year. Brent's annual average last year was $71 per barrel, the highest in the past three years.
Heating Oil (>60%)
Heating Oil, also known as No. 2 fuel oil, represents about 25% of the yield of a barrel of crude. The rise in crude oil prices is the primary reason for the rise in heating oil prices last year. Apart from crude oil, the heating oil price depends on three more factors: winter, competition and operating costs. The prices tend to rise in the winter months when demand for heating oil is high.
Propane prices primarily rise in winter as people use it to keep their homes warm. The U.S. Energy Information Administration expected households that use propane for heat to spend 54% more in 2021 than last year. Owing to rising prices, the propane stockpiles last year were less than average. The propane sellers in the U.S. usually start selling when the weather turns, but they continued exporting propane to India and China throughout the summer and early fall.
Strong demand for the petrochemical feedstock and the rising price of LPG (liquefied petroleum gas) are responsible for the rise in Naphtha prices. Asia is the biggest consumer and importer of naphtha. This commodity is used to make plastics and textiles, as well as to dilute heavy crudes. Last year, a report from International Energy Agency noted that the demand for naphtha was above pre-COVID-19 levels.
Rising crude oil prices and robust consumer demand are the primary reasons for the jump in gasoline prices. The crude oil prices increased throughout 2021, and the average crude oil price in 2021 was the highest since 2018. Reduced U.S. refinery capacity and low gasoline inventories are other factors contributing to higher retail gasoline prices. The gasoline production in the U.S. has been unable to keep pace with the consumption, resulting in inventory withdrawals.
Frost and drought in Brazil, which accounts for about 35% of global coffee exports, is a major reason for the rise in coffee prices. Heavy rains in Colombia, which is also a major coffee exporter, as well as the shortage of shipping containers in Vietnam have contributed to pushing up the prices as well. The Coffee C benchmark, which is the global benchmark for Arabica coffee, is close to its highest levels since October of 2011.
Several oat growing areas in the U.S. and Canada experienced drought during the 2021 growing season. On the other hand, demand for oats has been rising because of its health benefits, growing popularity as a snack product and due to oat "milk" as well. The sales of oat milk have grown significantly since 2017 and it is second only to almond milk. More oat milk plants are being developed, adding to the demand of oats.
Coal prices have been dropping over the years due to the closing down of coal plants. In 2020, EIA reported that 121 coal-fired plants had been closed or replaced with natural gas. However, a significant jump in natural gas prices and massive shortages in 2021, pushed up the demand for coal. The EIA now expects coal-fired electricity generation to increase for the first time since 2014.
Ethanol prices are rising because of the strong demand for biofuels. The prices of ethanol have recovered sharply after a downturn in 2020. About 3.9 million barrels of ethyl alcohol was produced in the first eight months of 2021, compared 3.7 million barrels and 4 million barrels during the same period in 2020 and 2019, respectively. A point to note is that the price of corn, which is widely used to produce alcohol, dropped around the same time.
The drive towards electric vehicles is a significant contributor to the rising lithium prices. The rising lithium prices will likely slow down the adoption of EVs. Mining.com's EV Battery Metals Index, a tool that was launched last year to track the value of lithium, cobalt, nickel, and other battery metals, has increased by about 400% from May 2020 despite the pandemic and supply chain constraints.
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