Influenced by the international geopolitical situation and other factors, the prices of global commodities such as oil, natural gas and grain have soared recently. The latest data show that the CRB index, which reflects the trend of global commodity prices, is at 269.02 points, a new high since November 2014.

Analysts believe that under the disturbance of geopolitical factors, short-term commodity prices may maintain a strong trend, especially the prices of energy, metals and some agricultural products may fluctuate greatly. For the impact of the real economy, it is suggested that the capital market should be used to resolve and hedge the price risk.

Expected to push up commodity prices in the short term

According to the latest data from Wenhua Finance and Economics, as of February 24, the CRB index, which reflects the trend of global commodity prices, was at 269.02 points, a new high since November 2014.

Among them, global energy and food prices have been at a high level recently. As of press time on February 25, Beijing time, the London Brent crude oil futures price for April delivery once broke through $101 per barrel, running near the high level since September 2014; the European benchmark natural gas price-TTF benchmark Dutch natural gas futures price continued to rise, with an increase of more than 2%; The main contract of wheat futures on the Chicago Board of Trade once hit a new high since August 2008.

As far as the domestic commodity market is concerned, on February 25, the Wenhua Commodity Index rose to 215.94 points, a new high since October 25, 2021.

"At present, the impact of the geopolitical situation is still not completely over, and there are still uncertainties in the future, which may have an impact on the commodity market." Corning, a macroeconomic analyst at Yide Futures, told reporters that the impact of the geopolitical situation on commodities is mainly reflected in the impact on the supply side, and that geopolitical tensions will tighten expectations of global supply of related commodities, thus pushing up commodity prices.

In fact, since the second quarter of 2020, global commodities have started to rise. According to the analysis of researchers, the driving logic of the rise is divided into two stages. From the second half of 2020 to the first quarter of 2021, the rise of commodities is mainly caused by supply reduction, demand recovery and liquidity flooding. Since then, the driving factor has shifted from the demand side to the supply side, which is reflected in the supply constraints and liquidity easing brought about by the epidemic and carbon reduction.

In this context, the impact of the geopolitical situation on commodities, Cheng Xiaoyong, director of the Baocheng Institute of Futures and Finance, analyzed that it was mainly reflected in three aspects: first, it promoted hedge buying, such as precious metals such as gold and silver; second, supply disruption expectations led to rising prices of grains such as crude oil, natural gas, aluminum, nickel, wheat and corn; Third, cost-driven, rising natural gas prices may lead to higher electricity prices in Europe, which will lead to reduced production of some commodities due to losses.

Cheng Xiaoyong believes that most commodity prices are at historic highs, and the Fed's interest rate hike is imminent, the above factors do not support a new high in commodity prices. However, due to the supply disruption caused by the epidemic and the background of carbon reduction and ESG governance, the decline of commodity prices will be slow.

Prices of energy, metals and agricultural products may be affected

From the perspective of the transmission path of geopolitical risks to commodity prices, Corning believes that Russia is a major exporter of energy and metals, among which natural gas exports rank first in the world, and crude oil and metal exports also account for a higher proportion of global exports. Ukraine is an important exporter of agricultural products, with barley, rapeseed and corn exports accounting for more than 10% of global exports. Therefore, the conflict between Russia and Ukraine has a greater impact on the field of energy and agricultural products. At the same time, the rise in international energy prices will also have an indirect pulling effect on the prices of alternative energy sources such as coal and agricultural means of production such as fertilizers.

In terms of energy, "statistics show that in 2021, Russia's crude oil and natural gas exports to Europe accounted for 29% and 36% of the global trade to Europe, respectively, and pipeline gas to Europe accounted for about 35% of the total imports of natural gas in Europe, and some European countries are even more dependent on Russian natural gas than 75%." Cheng Xiaoyong said that when the energy crisis broke out in Europe in 2021, natural gas power generation became an important source of electricity supply in Europe under the background of insufficient supply of wind power and hydropower and limited development of nuclear power. After the escalation of geopolitical risks, the price of natural gas in Europe soared again.

In terms of metals, he analyzed that from the perspective of electrolytic aluminium, Russia's output in 2021 was about 3.87 million tons, and its production capacity was about 4 million tons, accounting for about 5% of the world's total. At present, the production of electrolytic aluminum in Europe has been reduced by about 800,000 tons due to the high price of electricity, so the soaring price of natural gas will continue to drive up the price of electricity in Europe, and the reduction of production of electrolytic aluminum in Europe will be expanded in the short term.

"However, the short-term rise in the price of electrolytic aluminium will only lead to regional tensions, and the boost from geopolitical factors to aluminium prices will be short-lived." Cheng Xiaoyong said.

Do a good job of price risk resolution

At present, commodity prices are at a historical high, facing the upward pressure brought by the impact of external geopolitical factors, industry insiders suggest that price risk resolution and hedging should be done in a timely manner.

"At present, commodity prices are at a high level, domestic downstream demand is gradually weakening, and the profits of small and medium-sized enterprises continue to be squeezed.". Therefore, the executive meeting of the State Council held recently proposed that we should continue to do a good job in ensuring the supply and price stability of commodities, alleviate the pressure of rising costs of downstream enterprises, and maintain the basic stability of prices. Ensure food and energy security, ensure a good harvest of grain throughout the year, increase coal supply, support coal and electricity enterprises to make more efforts, and ensure normal production and people's livelihood. Cheng Xiaoyong said.

He suggested that, on the one hand, the government needs to strengthen regulation and control, introduce measures or optimize the mechanism to curb speculation; on the other hand, the government needs to allow some advanced production capacity to speed up the release of production capacity and optimize the carbon emission assessment mechanism.

"From the perspective of guaranteeing supply and stabilizing prices, first of all, we should continue to guarantee the production and supply of coal and agricultural materials, and consolidate the achievements of the policy of guaranteeing supply and stabilizing prices.". At the same time, we should do a good job of docking supply and demand links, prevent speculation and maintain the smooth operation of market prices. Corning said.