In 2020, Mintec analysis signaled a turnaround in the economy that would lead to a steep rise in commodity prices, which materialized in 2020 and 2021. Mintec’s models are now pointing to a commodity price peak in 2022, encouraging the supply chain industry to act with caution when fixing contracts, both in terms of length and volume.
“This is because our forecasting models have started to give early warning signals of an upcoming downturn in commodity prices. As a result, prices are likely to remain elevated in 2022 compared with historical levels, but the decline from 2022 is expected to last into late 2023 or 2024, and prices are forecast to reach more balanced levels in one or two years,” Mintec says.
From Mintec:
- Some commodities such as oilseeds and steel have already made their final peak, while others are still heading toward their maximum levels in 2022, with most of them expected to reach their highest point around spring 2022.
- Economic indicators such as new orders and manufacturing activity have lost momentum since May 2021, highlighting a potential slowdown in economic growth. In addition, the expected easing of supply chain disruptions is also likely to act as a bearish force.
- Shortages are most likely to turn into gluts, and companies should proceed with caution while planning to overextend their purchasing to ensure they are not securing goods at high prices unnecessarily.
“The expected downturn in the economy will have significant implications for most commodity markets. Orders are starting to slow down while inventory levels have begun to increase, signaling a potential shift in market dynamics, and consequently, a likely decline in prices in 2022. Therefore, procurement professionals should ensure that they have access to robust and timely analysis and price forecasts, so they can monitor these market developments effectively, generating substantial savings and increased profitability for their businesses,” according to Mintec.
