Commodity markets are finally beginning to recover from the many shocks that occurred over the last 12 months. All commodities that we examine are more expensive than they were at this time last year.

This is, however, somewhat deceptive: markets spent much of 2020 in freefall, so recovery can look like a 10% or even 20% increase. There are still several outliers: the most dramatic increases have been among various kinds of steel. This is generally due to increased demand from the residential sector, while logistics issues have stretched supply lines incredibly thin. It is important to note that an 80% increase in the price of steel does not translate to an 80% increase in the price of procuring and installing it, but it is nevertheless significant.

Looking ahead, we believe that the key factor in commodities prices will be the logistics industry – particularly for commodities that must be imported from abroad. Copper and aluminum can only be mined in places where it is physically present in the ground, lumber can only be produced where there are forests, and so on. This means that these goods must be shipped to where they are used, regardless of distance. Delivery schedules remain longer than normal, as the pandemic has thrown the logistics industry into disarray. We expect this to continue into the summer, as the backlog of orders has yet to be cleared.

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