Suspicious signs of a commodity crisis

Yesterday morning, the most important global financial news outlets, from Bloomberg to financial times, resumed the Beijing government press release to encourage citizens to stock up on essential goods; The government has also asked local authorities to keep food supplies adequate during the winter. The move was linked to a possible worsening of the infection, the risk of a very cold winter and even heightened tensions with Taiwan. We remember that the Chinese government issued a very similar statement at the end of September with almost identical recommendations.

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During the day, Chinese state media dismissed the government’s statement, explaining that citizens should not worry excessively and that the recommendation should be read “only” as a precautionary measure in light of the potential for infection to worsen. However, the signal was already presented in the same tones a month ago, and at the moment, the epidemic situation is still under control. However, what does not stay under control food prices And fertilizers that push farmers, for example in France, to change crops in favor of products with a lower fertilizer intensity.

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Global supply chains do not fit; Hiccup business in China is extending delivery times for many supplies and components and exploding corporate costs. For example, the number of Chinese containers leaving California ports continues to decline. The days it takes to get supplies to China are running out. This means that the pressure on supply chains is increasing and with it the possibility of some components being lost and one or another production interrupted.

Relations between the “West”, Russia and China are deteriorating, and its repercussions on trade relations are inevitable and have been going on for months. Worst case scenarios are not necessarily the case, but the risks in a world designed and built with long supply chains and idle warehouses and factories based in China do exist. Many, for example Europe, have long ceased to worry about a reliable hydrocarbon supply, convinced that “geopolitical” considerations would not have called into question the decisions of the producing countries. Yesterday’s direction Russian gas shipments.

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The trend of infection is just one of the concerns that could justify the new advice that the Beijing government has been giving its citizens. This is advice not given lightly because disturbing reactions, which the state media must deal with, are clearly inevitable. The explosion in food prices that we are partially observing and now seeing comes with rising fertilizers and global supply chains under increasing pressure are two other potential good causes. It was Bloomberg who wrote the possibility of tensions with Taiwan as a possible explanation for the Chinese recommendations. It is a hypothesis that advises us to read what is happening not only through the lens of a pandemic, but also with geopolitical tensions unloading on component supplies and hydrocarbons.

We can only make hypotheses and find affirmations or denials in evolving reality. There have been many clues in recent months and they all agree. Whatever happens, concerns about supplies and prices are not easing for now.

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