A global commodities rout is fueling fears of a bleak economic future

Published

2 years ago

July 6, 2023

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Global commodities have seen a more than 20% slump compared to the same period last year, as reflected by the S&P GSCI Commodities index.

Jung Getty | Moment | Getty Images

Prices of commodities like crude oil and iron ore have been sliding this year, underlining a continuing economic rout across the globe and possible recession risks, market watchers told CNBC.

Global commodities have seen a more than 25% slump over the last 12 months as reflected by the S&P GSCI Commodities index — a benchmark measuring the wider performance of various commodity markets.

Out of the different baskets of commodities, industrial metals have slid 3.79% during that period (up to June 30), while energy commodities like oil and gas have slipped 23%. Conversely, agricultural commodities such as grain, wheat, and sugar have gained roughly 11%.

But the overall slide for the index is likely pointing to a global economic slowdown and a recession, analysts say, as China’s Covid-19 rebound loses momentum.

“Iron ore and copper are good barometers of the very cyclical portions of the global economy, including construction and manufacturing, of which are in recession in many places,” Kpler’s Senior Commodity Analyst Reid I’Anson said via e-mail.

“It is my belief that this will flow through to a broader decline in economic activity, especially in the West,” I’Anson added.

He foresees that the U.S. will likely see a GDP contraction in the fourth quarter of this year or 2024’s first quarter, and that Europe will follow suit in three to six months.

“The failure of the Chinese economy to live up to the expectations of the market is the biggest reason commodity markets are struggling to find a footing,” I’Anson continued.

China has been posting a slew of economic data that has been weaker than market expectations, pointing to a faltering Covid reopening after years of strict lockdowns. Bank of America analysts confirm that China’s rebound has been weaker than expected.

“Especially for property, investment dropped 7% year-on-year,” said the bank’s Head of Asia-Pacific Basic Materials and Oil‎ & Gas Research, Matty Zhao. A property market decline is often associated with a drop in demand for construction materials like steel, aluminum, copper and nickel.

China’s real estate sector slump is predicted to last for years, according to Wall Street banks. And the Chinese government doesn’t look like it’s going to pursue an aggressive fiscal stimulus package, said I’Anson. Even if it does, “it would need to be sizable to impress markets at this point.”

Biggest losers, and what it means

While prices of soft commodities are rising as El Niño hammers crop output prospects, energy and industrial metals are trading a lot lower.

Among the biggest losers of the commodities slide are iron ore and oil, the analysts concur. Kpler has cited the downbeat prospects of copper as well, which acts as a proxy economic pulse check due to its various uses such as electrical equipment and industrial machinery.

Oil prices have declined significantly, with the global benchmark Brent plunging 34.76% year-on-year, even as OPEC’s output cuts come into play.

Weak energy consumption in Europe, in part due to a warm winter, has led to gas storage surging to past-five year high levels in the EU, and pushed down prices, said Zhao. Additionally, the world’s largest oil importer China, has been ramping up coal production instead amid a power crunch.

That being said, in the event of an extreme cold weather event, energy prices may recover in the second half of the year, Zhao forecasts.

According to BofA, the year-to-date average of steel and iron ore prices dropped 16% year-on-year on the back of sluggish construction demand. Poor construction demand also reflects in other building materials like cement, whose inventory levels have reached 75%.

Iron ore is primarily used to make steel, an important material in construction and engineering projects.

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“Commodities such as industrial metals tend to move lower ahead of economic leading indicators like PMIs and historically have helped signal when a downturn might occur,” said Director of Commodities and Real Assets at S&P Dow Jones Indices, Jim Wiederhold. He added that oil tends to “dip drastically” as a downturn is happening.

“In general, many major commodities slumped over the last few months as companies and consumers reduced their demand ahead of a potential economic downturn,” he said.

Commodities also tend to move in tandem with changes in inflation, Wiederhold continued. And if inflation continues to dip lower, commodity markets could see more downside in the short term, he said.

According to the International Monetary Fund, global headline inflation is poised to fall from 8.7% in 2022 to 7% in 2023.

“Given commodities are an early indicator, I’d say prices will likely struggle to find much footing until next year,” said I’Anson.

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New cars from Volvo, VW, Cadillac, and more – plus 0% on Model 3 as Tesla sales fall

Published

11 hours ago

March 6, 2025

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New cars from Volvo, VW, Cadillac, and more – plus 0% on Model 3 as Tesla sales fall

It’s been a big day for big reveals with the all-new Volvo ES90, a new compact electric city car from Volkswagen, plus a pair of new, over-the-top EVs from General Motors that perfectly exemplify American excess. All this and maybe the dawn of the long-awaited “Tesla Killer” on today’s revealing episode of Quick Charge!

GM is practically daring the competition to build a bigger, badder EV with a new, bigger $133,000 Cadillac Escalade and 1,100 hp off-road special in the form of the new Chevrolet Silverado EV ZR2. Finally, you guys are never happy … try to enjoy this episode, anyway!

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Tesla to build a new Megafactory in Texas near Houston

Published

15 hours ago

March 6, 2025

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Tesla to build a new Megafactory in Texas near Houston

Tesla is going to build a new Megafactory in Texas near Houston, according to a tax abatement agreement with Waller County.

At the time of writing, Tesla had yet to comment on the new project, but the Waller County Commissioners Court confirmed the project on Wednesday when they approved a tax abatement deal with the company:

Under the proposed agreement, Tesla will receive tax abatements from Waller County based on property improvements. The deal includes $44 million in facility improvements and $150 million in Tesla manufacturing equipment that Tesla will install. The next phase involves a new $31 million distribution facility with about $2 million in Tesla distribution equipment and building upgrades.

Tesla is going to take over a 1-million-sq-ft building that it already held the lease on at the Empire West industrial park near Katy, Texas – just outside of Houston.

Logistics company DB Schenker occupied the space where it handled parts for Tesla, but it will move out and Tesla plans to build Megapack production lines at the site:

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Tesla will operate a new Megapack battery storage manufacturing facility at a 1 million-square-foot building, which was initially constructed with no tenant on speculation that it would attract jobs and economic development.

Tesla has previously referred to plants producing Megapacks as “Megafactory”. The company already operates one in Lathrop, California, and one in Shanghai, China, where it just started production.

Those factories are set up for a production capacity of 40 GWh worth of Megapacks per year.

It’s not clear if Tesla plans for a similar capacity at this new factory, but the county announced project should result in creating 1,500 jobs.

In addition to the existing building, the project will include the construction of an additional “600,000-square-foot distribution facility with some manufacturing capabilities.”

Unlike its automotive business, Tesla’s energy business has been growing at an impressive pace – although prices and margins have come down last year.

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Is Genesis taking notes from Porsche? New GV60 Magma caught with the Taycan [Video]

Published

16 hours ago

March 5, 2025

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Is Genesis taking notes from Porsche? New GV60 Magma caught with the Taycan [Video]

Genesis is gearing up to unleash its alter ego with its upcoming Magma lineup, its debut into the world of high-performance luxury vehicles. First up is the Genesis GV60 Magma, due out later this year. As testing wraps up, the GV60 Magma was spotted alongside none other than the Porsche Taycan.

The first dedicated Genesis EV model, the GV60, will kick off another new chapter for the Korean luxury automaker.

Genesis unveiled the GV60 Magma last March, claiming it will kick off “the brand’s expansion into the realm of high-performance vehicles.” The performance EV includes an improved battery, chassis, and motor for added performance.

The Magma model boasts a wider, lower stance for more control. Other key upgrades include a wider front air intake to help cool the batteries, motor, and brakes. It also includes air curtains to maximize efficiency and an added roof fin channels air to the rear wing, generating downward force.

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Genesis upgraded the interior to match the GV60 Magma’s luxurious, sporty design. It includes unique sports car-like bucket seats with exclusive “double-diamond stitching” in the Magma orange and titanium coloring.

Genesis GV60 Magma spotted with the Porsche Taycan

With its official debut coming up, the sporty Genesis GV60 Magma was spotted testing alongside a Porsche Taycan and Hyundai’s IONIQ 5 and IONIQ 6 N models.

Despite the camouflage, the video from CarSpyMedia reveals a few new design elements, like the two-line headlight featured on the updated GV60 model.

[embedded content]

Genesis GV60 testing alongside a Porsche Taycan, Hyundai IONIQ 5 N and IONIQ 6 N (Source: CarSpyMedia)

Genesis will launch the GV60 Magma later this year in its home market, followed by the US, Europe, and others. Production is scheduled to start in the third quarter of 2025.

Will the Genesis GV60 Magma keep up with the Porsche Taycan or Tesla Model S Plaid? Priced and specs will be revealed closer to launch, but it will sit above the Performance AWD trim, which starts at $69,900 in the US. With up to 429 horsepower and 516 lb-ft of torque, it can hit 0 to 60 mph in 3.7 seconds.

	Horsepower	0 to 60 mph (seconds)	Starting Price
Genesis GV60 Performance	429	3.7	$69,900
Genesis GV60 Magma	?	?	?
Porsche Taycan	402	4.5	$99,400
Porsche Taycan Turbo GT (with Weissach Package)	1,092	2.1	$230,000
Tesla Model S Plaid	1,020	1.99	$89,990

Genesis GV60 Magma vs Porsche Taycan vs Tesla Model S Plaid

In comparison, the Porsche Taycan starts at $99,400 with up to 402 hp and a 0 to 60 mph time in 4.5 seconds. The Taycan Turbo GT, equipped with its Weissach package, packs 1,092 hp for a 0 to 60 mph sprint in just 2.1 seconds, but it costs $230,000.

Tesla’s Model S Plaid starts at $79,990 and can accelerate from 0 to 60 mph in 3.1 seconds with 1,020 horsepower. Which performance EV are you choosing?

Source: CarSpyMedia

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