Steep trend change on the commodity markets
Increasingly efficient extraction methods and well-rehearsed infrastructures made it possible:
Commodities became cheaper and cheaper on average for a whole century, even in the face of inflationary pressure from the reserve currencies and over price-driving events such as the Great Depression of the 1930s or the oil crisis of the 1970s.
Then suddenly a radical change in trend. The last 15 years draw a new trend in the statistics – prices are suddenly rising rapidly1. Even more so since the start of the pandemic: commodity prices are at an all-time high and unstable at these lofty heights to boot.
Uncertainty caused by high price volatility2 robs companies of the courage to invest their future with confidence.
Once forecasts, now reality
What was previously the stuff of trend analyses, forecasts and preventive environmental activism has now become concrete figures in quarterly accounts and weighs on the profit expectations of large companies3.
Are we only seeing a short-term price phenomenon triggered by the lastest inflationary spurt4 during the pandemic or is the efficiency of our methods turning against us and depleting our raw materials in record time?
As early as 20055, an increasingly scarce commodity situation was reported, which has since become more and more painfully visible in commodity price charts.
First-hand price impressions – 2021 and 2022 at Baukom: Last year, our suppliers' prices increased significantly and our prices followed. We saw the same with our competitive partners. The frequency of these price increases now comes in months rather than years, reaching double-digit percentages. Even a much anticipated easing of prices is not coming for the time being; the first quarter of 2022 with the situation in Eastern Europe took care of that.
What to expect now?
Export restrictions have already been called for6 in order to be able to use the scarce raw materials ourselves.
The recent price sprint7 of sawn timber has eased8 somewhat in the meantime, but concerns about persistent price inflation are growing. The fact that the money printing machines have been running hot since the start of the pandemic certainly does not help.
Entrepreneurs with foresight should therefore take the precaution of assuming that the recent price drop is only a small breather instead of a renewed trend reversal into a deflationary phase.
Because where would a complete reversal of the trend come from? We can no longer discover a new continent full of raw materials and rich landscapes on healthy soils. The planet is largely mapped and the number of deposits worth building is shrinking.
This inflationary trend is not only evident on paper due to wild money printing and decoupled market dynamics. It is closely related to a dwindling quantity and extractability of the resources we have left.
A future of scarcity?
Have we been so successful in extracting raw materials that the planet's supplies are already depleted and even wood is not growing fast enough to meet our needs?
Because even the use of biological materials does not mean that we can act rashly now: Every such material needs a soil area to grow and too fast growth will be noticed in the material quality. In addition, opportunity costs arise: What else could be grown here?
Usable land is limited, often depleted and decimated by soil erosion, and we see no sign of saturation in the demand for raw materials. On the contrary: our hunger for raw materials is growing9. The construction sector gobbles up the lion's share, as 50% of all resources are consumed by the construction sector.
Solutions that are no solutions
Will we soon be able to mine ores on asteroids? Even if we do, how will this endeavour soon be cheap enough to be a real alternative to intelligent systems of economic management?
We are made more aware than ever of the finite nature of the planet and must work with what is in front of us without dreaming of gold mines in space.
Dwindling raw materials at rising prices with a high resource burden on the building sector will jeopardise its future viability until we find a clean and scalable solution.
So what is the answer to a limited amount of resources for a species with a growing need for houses, smartphones and various infrastructures?
This question is gradually breaking out of the sphere of environmental activism and putting itself on the agenda of future market leaders.
The next article in this series will be dedicated to the question of how circular business models not only speak of foresight and systems intelligence, but will also soon bring a significant economic advantage.