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Raw materials prices have marked fall

International prices of raw materials registered a marked decrease during the first quarter of 2020 and, above all, oil prices began to drop in February due to expectations of lower oil demand derived from the global effects of the Covid pandemic. -19.

Raw materials are materials or substances used in the primary production or manufacture of goods.

This decline was accentuated in early March with the termination of production cut agreements between Saudi Arabia and Russia. Although the main oil-producing countries reached a new agreement to cut production in the coming years in mid-April, crude oil prices continued to decline in light of expectations of low demand and restrictions on storage capacity.

In particular, the rapid reduction in available storage capacity, coupled with the expiration of WTI futures contracts for oil delivery in May, caused its price to drop for the first time in history.

However, according to Banco de México (Banxico), pressure on oil storage capacity in the United States has recently been reduced and some countries, including Saudi Arabia, announced production cuts in addition to those previously agreed, leading to some recovery of prices with respect to the minimum levels registered in April, although these remain at relatively low levels.

Raw Materials

For their part, industrial metal prices plummeted during the first quarter of 2020 in anticipation of lower demand for manufacturing goods as a result of the spread of Covid-19 and the measures implemented to contain it.

Although recently both the prices of industrial metals and some grains have registered a moderate recovery as a result of the relaxation of China’s containment measures, they remain at levels lower than those reached at the start of the pandemic.

Traders buy and sell raw materials in what is called the factor market because raw materials are factors of production, as are labor and capital.

 

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