While some commodities’ prices stabilized after rocketing following the pandemic, others produced spectacular gains. Many causes, such as the conflict between Russia and Ukraine, the world economic slowdown, and a decline in China’s demand for raw commodities, were responsible for the instability.
According to data from TradingEconomics, we highlight the top 10 best and worst- performing commodities as follows. These exclude soft commodities such as agricultural goods and meat.
Coal returns to be the largest following the energy crisis
The list of 10 best commodities with highest return in the year respectively includes:
- Coal
- Lithium
- Nickel
- Titanium
- Heating oil
- Uranium
- Platinum
- Molybdenum
- Iron ore
- Gold
Coal prices jumped as a result of rising energy demand during the 2021 global economic recovery, which set the strongest post-recession growth speed in the previous 80 years. The spark was lit by Russia’s invasion of Ukraine, which led to a 157% increase in coal prices in 2022.
Coal outperformed the other nine top commodities in terms of returns, making it the best-performing commodity in 2022.
The demand for EVs and batteries is still driving up the price of nickel and lithium (carbonate). Prices for lithium have surged 11-fold since the start of 2021 and are still high at more than $70,000 per tonne.
For the first time since 2010, the average price of lithium-ion battery packs climbed in 2022 as a result of rising costs for lithium, nickel, and other battery metals. Prices for battery packs are anticipated to rise in 2023 as well before declining in 2024.
As nations resurrected their nuclear power plans to fight the energy crisis, the year was also favorable for uranium. Notably, Japan announced faster restarts for many idle reactors, and Germany prolonged the lifespan of three units that were scheduled to shut down in 2022.
Important to mention crude oil market this year
Crude oil is by far the most popular commodity, and for the majority of 2022, oil prices dominated the news.
By May 2022, WTI crude oil prices had reached their highest level since 2013 in response to Russia’s invasion of Ukraine. However, prices dropped from about $116 per barrel to $80 per barrel (a 31% drop) between June and the end of December. Overall, crude oil saw a -3% return in 2022.
The worldwide slowdown in economic growth and China’s severe COVID-19 lockdowns are both to blame for the loss of oil’s initial gains.
Top 10 most severe commodity drawdowns
This includes Magnesium, Tin, Propane, Rubber, Cobalt, Natural Gas TTF, Naphtha, Zinc, Copper and Aluminum. The fact that prices stabilized at lower levels after bullish surges in 2021 and the beginning of 2022 is substantially to blame for the poor returns for the majority of commodities.
For instance, after reaching an all-time high in September 2021, the price of magnesium was more than half in 2022. In a similar manner, tin prices also returned to normal after increasing as a result of unusual demand from the electronics industry during the post-pandemic economic recovery.
One of the highlights of the year was the fluctuation in the price of European natural gas (TTF gas). In August, prices increased to almost €340 per megawatt-hour as the area sought to reduce its reliance on Russia.Â
However, they have since decreased as a result of warmer winter temperatures and a general decline in energy demand. However, TTF prices were on average 150% higher in 2022 than they were in 2021.
It is well known that copper prices correspond to the state of the world economy. It is safe to conclude that they did so in 2022, dropping 16% as economic development slowed and China’s economic activity occasionally ceased as a result of Zero-COVID measures.Â
Conclusion
The commodity market in 2022 saw significant volatility, with some commodities experiencing significant gains, while others saw significant drawdowns. Coal emerged as the best-performing commodity due to rising energy demand, and nickel and lithium continued to increase due to demand for electric vehicles and batteries. Uranium also saw an increase in demand as nations sought to increase nuclear power as a means of combating the energy crisis. In contrast, crude oil, the most popular commodity, suffered due to the global slowdown in economic growth and China’s severe COVID-19 lockdowns.
The commodity market’s instability was largely due to a combination of factors, including geopolitical conflicts, fluctuations in demand, and global economic activity. Despite this, it is still possible for investors to make a profit in this market, as some commodities continue to perform well.
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