China fuels demand for raw materials

The global economic upswing, with the USA and china as the big ships, is causing raw materials such as metal and wood to become increasingly scarce – and therefore massively more expensive.

In the german trade sector, this is increasingly jeopardizing the longed-for upswing. The situation is throwing all calculations out of kilter and putting numerous companies in the "completely paradoxical situation" of having to send employees on short-time work when order books are full, said hans peter wollseifer, president of the skilled trades, to the german press agency. "This is dramatic not only for the construction and finishing trades, which have been hardest hit, but for our economy as a whole."

Wollseifer spoke of an "unprecedented" shortage of materials with a simultaneous price explosion. "The situation has become even worse and more acute in the past few weeks."According to calculations by the hamburger research institute HWWI, prices for industrial raw materials rose by an average of 14.2 percent from april to may alone.

"The rapid recovery of the global economy, and in particular the strong growth trend in the chinese economy, is currently creating high demand for commodities," the HWWI reported on friday. "Prices for industrial raw materials rose particularly sharply in may, as high global demand, especially from china, was met by continued limited supply."

More than half of the companies surveyed are now struggling to procure materials, compared with just over one-third in january, said wollseifer, referring to a new survey of craft enterprises. Of the companies with impairments in their own supply chain, 84 percent reported that orders had to be canceled or postponed due to a lack of materials. 61 percent of companies affected by supply shortages reported that price jumps were making it uneconomical to fill existing orders.

According to the survey, metals are currently the most frequently in short supply in the operating sector, while there are also bottlenecks for wood, plastics and electronic components. Prices for many of these primary products are rising sharply. The HWWI cites copper as an example, but also nickel and tin. "China is the world’s largest consumer of copper, consuming half of global production," writes the HWWI. The electrification of the economy driven by climate policy is also seen as a driver for demand for industrial metals such as copper.

The experts have identified a ten-year high for tin, which was 14.4 percent more expensive in may than a month earlier. This is explained by demand from the consumer electronics sector. "Due to the increase in remote working and homeschooling during the pandemic, demand for smartphones, laptops and ipads has soared."Steel and iron ore are also reported to have risen massively in price.

Timber prices also continue to soar. "On average, lumber prices rose by another 33 percent compared to april, more than 340 percent higher than in may 2020," according to the HWWI. "Lumber prices continue to be driven by a tremendous increase in demand as the economy recovers."

For consumers, the trend was increasingly reflected in price increases, according to the ifo institute in munich. "Many companies pass on price increases on the procurement side," ifo economic expert klaus wohlrabe said on friday. "In addition, there are some catch-up effects due to earlier price reductions during the corona crisis."According to his assessment, there are hardly any industries in which price increases are not imminent. " the sharp price increases for many raw materials ultimately cut across the entire economy."

According to hans peter wollseifer, the explosive mix of supply shortages and rising prices threatens the very trades that had proved to be economic stabilizers during the pandemic – with macroeconomic consequences. "If this economic anchor should come loose, then not only the construction and finishing trades are likely to run into heavy water, but the entire economic catch-up process in the second half of the year is at risk," said the president of the central association of german skilled trades (ZDH). "And as far as upcoming future projects are concerned, for example in housing construction, energy and network as well as broadband and fiber optic expansion, these will be put on ice and come to a standstill for the time being. Remedial action is therefore urgently needed."

According to a recent ifo survey, almost half of all companies in germany have difficulties with the supply of intermediate products. "We have never had such a high percentage before. All this is slowing down the economic recovery," ifo president clemens fuest told "zeit online" on friday. However, his institute assumes that this situation is temporary. "There is also a shortage for good reasons, which occurs when the global economy picks up again, companies need more semiconductors and therefore the price rises."