What is Going on With Commodities? - A Lot, Actually.
A Number of Unusual Market Forces are Affecting Commodities
Commodity Prices Following an Unprecedented Year - U.S. Businesses that rely on any number of inputs from domestic and foreign suppliers have all noticed two consistent trends in the first quarter of 2021 – underlying commodities and manufacturing inputs are taking significantly longer to acquire – and when they are available, they are considerably more expensive. The why behind these trends is a complex (and unprecedented) mix of factors.
What we are witnessing now is a supply chain struggling to restart after a very long pandemic winter. There are compounding problems however, including a labor crunch, and lingering capacity issues dating back as far as the 2007/2008 financial crisis.
There is perhaps no better example of the unique confluence of factors leading to the supply and production crunch in the US than the lumber industry, where prices have tripled in the past 12 months. Due to lumber shortages and increasing costs, the average US single-family home now costs $36,000 more to build owing to the price of lumber.
Similarly, the U.S. is expected to build 1.3 million fewer cars in 2021 due to a microchip shortage. The Ever Given fiasco in the Suez Canal continues to contribute to ripple effects across shipping, U.S. tariffs on some commodities are slowing critical recovery supply, and even the Mountain Pine Beetle of Canada is playing a role in our 2021 headaches.
To more fully understand the unique mix of factors leading to these market outcomes, click the button below to read our full article on the problems facing suppliers and manufacturers.
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