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Economy: What do expensive raw materials mean for inflation


The global economy is picking up, many prices are rising by leaps and bounds. If the current development continues, the lives of the citizens could become significantly more expensive.

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We are once again talking about a »super cycle«.

We had that before, back in the noughties, when the raw material markets were bought short during a global boom.

Shortly before the crash of 2008, the prices of oil, copper, zinc, wheat and many other commodities rose rapidly.

Inflation picked up and the ECB reacted by increasing interest rates, although the financial crisis was already on the horizon.

At that time, the construction and infrastructure boom in China in particular drove the demand for raw materials of all kinds. Worldwide it made many goods scarce.

In addition, there were speculators who additionally fueled the upward pressure on prices.

Is history repeating itself now?

Again the prices of many raw materials are rising sharply.

In the past month alone, copper, nickel, lead, aluminum and palladium have become more than 10 percent more expensive.

The price of copper has almost doubled within a year.

Agricultural raw materials are also becoming expensive: for maize the monthly price increase is 36 percent (141 percent compared to the previous year), for wheat 22 percent (44 percent compared to the previous year), as calculations by the Dekabank economists show.

Again there are plenty of speculators betting on prices that will continue to rise.

To the author


Institute for Journalism, TU Dortmund

Henrik Müller

is professor for economic journalism at the Technical University of Dortmund.

Before that, the graduate economist worked as deputy editor-in-chief of manager magazin.

In addition, Müller is the author of numerous books on economic and monetary policy topics.

Every week he gives a pointed outlook on the most important economic events of the week for SPIEGEL.

The increases also result from the fact that prices were very low a year ago.

In spring 2020, the corona pandemic had large parts of the global economy firmly under control.

Oil, for example, cost less than $ 30 per barrel at the beginning of May 2020. If the price is now close to $ 70, that's an increase of 120 percent, but more of a normalization.

However, other goods are currently so scarce that they are now hindering production in this country. This not only applies to raw materials, but also to industrial intermediate products. According to a recently published survey by the Ifo Institute, 45 percent of production companies suffer from bottlenecks in purchasing - the highest value that the Munich researchers have measured since 1991. That could become "a serious problem for German industry." Among the car manufacturers and their suppliers, 65 percent of the companies surveyed said they were affected by supply bottlenecks, while the figure for furniture manufacturers was 57 percent.

The demand is there - thanks to an upswing that is gathering pace as coronavirus restrictions are gradually eased in many affluent countries.

What is missing is material to produce.

Computer chips are so scarce that some automakers are cutting back on production.

Daimler, Audi and Ford are already running short-time working, although there are enough prospective buyers.

The prices rise accordingly.

A limited number of product groups are still affected, especially energy, metals, wood, building materials and chemical products.

Sea freight has also risen by leaps and bounds recently.

In March, the freight rates for ships coming from Asia were four times higher than the previous year.

This was also due to the temporary closure of the Suez Canal.

Is the development going on like this?

Are there signs of an inflationary dynamic that will lead to a sharp rise in consumer prices?

Paradox: a green boom that consumes a lot of raw materials

There are two main reasons for the raw materials boom.

First, there is the post-Corona upswing in the major economies, the force of which many producers have obviously underestimated.

The demand from China has increased dramatically, especially for German industrial products.

The US economy is warming up.

Europe should follow in the second half of the year (


there are new economic figures from Brussels).

more on the subject

Money or Freedom: Germany's Fatal Dependence on ChinaA column by Henrik Müller

The shutdowns are coming to an end, and citizens are realizing consumer wishes that have been postponed until now. Finance ministers and central banks, especially in the USA and the EU, are also pumping up the economy with gigantic support programs. That creates bottlenecks at first. But if the capacities are increased accordingly, the situation for many preliminary products should ease. The current shortages would be a transitional phenomenon.

Second, there is a massive expansion of renewable energies and electromobility. As many governments are setting themselves more ambitious climate policy goals, more wind turbines, more solar panels, more electric cars are needed - all of these products contain plenty of copper and other metals. Those who predict a new super cycle in raw materials are primarily thinking of the major climate change that is now apparently actually taking place.

Before the global economy can become net climate neutral, it needs a lot of raw materials, especially copper.

But the production capacities are likely to remain limited for years.

Ivan Glasenberg, head of Glencore, one of the largest copper producers in the world, reckons that the metal will have to be 50 percent more expensive before it is worth exploring more mines.

He recently told the Financial Times.

The green super cycle would therefore be at the very beginning.

When life gets more expensive

At the same time, the world has changed structurally.

Protectionism is rampant.

International supply chains are crumbling, many governments prefer domestic production to imports.

This also tends to exacerbate delivery bottlenecks and drive prices up.

In the medium term, the demographic development is reducing the potential of workers, which is likely to result in staff shortages, especially in labor-intensive service sectors.

more on the subject

Demography: We are ripe for an Agenda 2030A column by Henrik Müller

Nevertheless: So far there is not much to be seen of inflation - that is, a broad increase in consumer prices.

(Watch out

for new figures from China and Germany on




.) The cost of living for citizens is developing moderately.

The measured inflation rates are low.

The expected increases in consumer prices in the near future are by no means worrying either.

But it doesn't have to stay that way.

If the current development continues, a dynamic could emerge that will make life considerably more expensive for citizens.

Central bankers were demonstratively relaxed

Unlike in the past, the central banks of the major economies are apparently determined to let the boom run for now.

In 2008 and 2011, the ECB tried to counteract this by raising interest rates.

Tighter money should dampen demand and keep price dynamics in check.

These steps have drawn a lot of criticism from the Frankfurt central bankers.

Premature countermeasures slowed the recovery early on and caused a lot of damage, it said.

This time the central bankers are demonstratively calm. Jerome Powell, Chairman of the US Federal Reserve, announced last summer that he no longer necessarily wanted to take countermeasures if inflation rates rose above two percent. The two percent threshold should only apply over the longer term. Since then, he has reaffirmed this stance again and again. However, this leaves open when and how the world's most important central bank wants to slow down accelerating price dynamics.

After many years of very low inflation rates, the major central banks on both sides of the Atlantic are now also pursuing other goals. Fed Chairman Powell worries about employment and distribution issues. The ECB wants to do more to protect the climate. In addition, public and private debts are high and have continued to rise due to the corona crisis. A tighter monetary policy could bring many companies and entire countries to the brink of bankruptcy. A little more inflation may appear to be the lesser of two evils.

Sure, it is by no means certain that the currently rising commodity prices herald a new era of inflation.

It is possible that the warming upswing will only be an intermezzo before new corona waves stifle the economy again and force citizens to hold back from buying.

Conceivably, in a year from now, today's inflation warnings will seem like a bad joke.

I wouldn't bet on it.

The main economic events of the week ahead

Open assembly area




- from BioNTech, Traton, Euronext.

Expand Tuesday area

Beijing -

Inflation in the Far East

- China's statistical office publishes figures on the development of consumer prices in April.




- from Eon, Thyssenkrupp, Dürr, Gea, K + S, United Internet, Bilfinger, Bechtle, Jenoptik, Hochtief, Aareal Bank, Nordex, Evotec, Mediobanca, Nissan.

Expand Wednesday area

Brussels -

On the situation of the old world

- The EU Commission presents its spring economic forecast.

Wiesbaden -

German inflation

- The Federal Statistical Office publishes details on German price developments in April.

London -


- UK statisticians show how GDP developed in the first quarter and foreign trade with the EU in the first quarter.

Business figures III

- from Allianz, Bayer, RWE, Deutsche Telekom, Merck, Deutsche Wohnen, Schaeffler, Scout24, Commerzbank, KWS Saat, Sixt, Salzgitter, ProSiebenSat.1, Tui, Leoni, Lanxess, Hapag-Lloyd, ABN Amro, Iberdrola, EdF.

Expand Thursday area

Business Figures IV

- from Telefonica, ACS, Walt Disney.

Open area Friday

Berlin -

traffic light on yellow?

- Digital federal party conference of the FDP.

Business figures V

- from Knorr-Bremse, Borussia Dortmund.

Source: spiegel

All business articles on 2021-05-12

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