COMMODITIES AND THE
The macro scenario is becoming cloudier with tariffs being imposed by the USA and with a degree of retaliation, including from neighbouring countries like Canada and Mexico, but also the EU.
STEEL AND ALUMINIUM When it comes to steel and aluminium, we could see some flow being re- routed and displacing domestic production versus cheaper imports, like steel into the UK versus domestic production. Many currencies are holding their value against the dollar, but it seems it is a weaker dollar that is providing their strength.
CHALLENGING YEAR AHEAD
We are into the third month of the year with greater challenges ahead for commodities, as political manoeuvres are impacting short-term economic recoveries to a large degree.
So, for the time being, we are seeing trading patterns potentially being challenged and likely adjusted or re-routed. The dollar remains underperforming versus emerging currencies like the Brazilian real. Stock markets are being pushed back.
Countries like Brazil, an Agri Super Power will likely benefit from any short-term “retaliation” from China, so it seems. But will China use agricultural commodities to “please” the USA? China is a major agricultural importer but is already buying a lot from Brazil. Can they buy even more?
Short-term, supply and demand may take a step back in terms of the value of certain commodities, and although de-risking could take place, it is possible that commodities, including agricultural products, may not be so desirable.
Let’s have a look at what happened recently. FCOJ rallied from about US¢/ lb 150 mid-2023 to US¢/lb 525 till the end of Dec 2024, then plummeted to about US¢/lb 275 in the past two months. The state of São Paulo in Brazil had two poor crops (2023 and 2024) which caused supply to be reduced, and when there were no sellers, futures just shot up. When profit-taking became more intense (since Jan 25), due to a lack of buying, prices dropped 50% in two months!
34 | ADMISI - The Ghost In The Machine | Q1 Edition 2025
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