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Copper’s year-long rally reverberates through homes, phones and cars

(Bloomberg) – Faced with soaring copper prices, Carrier Global Corp. has a plan to contain costs: it covers the costs of raw materials and then charges its customers more for its heating, ventilation and air conditioning systems. symbolizes the puzzle of manufacturers as the prices of raw materials soar. With a way out of the pandemic in sight, business executives, economists and investors betting on a strong recovery face a critical test as producers attempt to shift higher costs onto consumers. Carrier’s offer is an early sign of success. Even after raising prices earlier this year, the company still expects sales growth of between 6% and 8%. Chinese company Gree Electric Appliances Inc. – the world’s leading manufacturer of residential air conditioning – is also increasing inventory in a booming consumer electronics and appliances market. The whole world has demanded a hand on the back of the pandemic, ”said Michael Cuoco, head of hedge fund sales for metals and bulk materials at StoneX Group, by telephone. As rising costs of goods will eat away at fixed income yields, some observers are seeing an inflationary feedback loop developing that could hit the recovery much harder in the real world. exert much more immediate pressure on consumers. Lumber futures contracts in the United States also hit a record high, prompting inflation fears in the housing market. As investors react to rapid inflation dynamics in financial markets, copper is caught in the cross winds. Prices hit a new nine-year high on Thursday, as Federal Reserve officials assured them they did not view rising commodity costs as a threat to growth, but copper suffered the most on Friday. sharp one-day decline in more than four months, with a massive sell-off in global stock and bond markets indicating investors believe the effects may be less benign and that a policy response may come sooner. All of this sets up a dangerous game between investors and central bankers led by the Fed. U.S. officials are adamant about pumping in more stimulus to support a recovery, with a $ 1.9 trillion package for debate in Congress and even a willingness to run the economy a bit on the hot to maximize l ’employment. sending a signal that the market is becoming more optimistic about this year’s global recovery, ”Khoon Goh, Asia research manager for the Singapore-based Australian and New Zealand banking group, said in an email. “Since inflation starts at a very low point, there is room to absorb the rise in commodity prices.” Markets, meanwhile, see a faster recovery and greater risk of overheating, and they are on their guard for any signs that Fed chief Jerome Powell is losing patience in the face of soaring inflation expectations. and offers now distant plans to make monetary policy less accommodative. Manufacturers accustomed to being caught between markets and policymakers, including with the US-China tariff wars, are already making adjustments The carrier has raised prices while covering more than 75% of its copper, aluminum and steel inputs after 2021, Senior Vice President Patrick Goris said at a sustainability conference on February 23. the latest hike in raw material costs, President and COO Ted Decker said in a Feb. 23 earnings call. Decker said. “We manage this like a portfolio. We work closely with our supplier partners to champion customer value. According to IHS Markit, manufacturers in the euro region experienced the largest monthly increase in input prices in nearly 10 years in February. But after years of stagnant inflation and growth in the region, order books are rapidly filling and stocks of finished goods are collapsing. The outlook for metalsmakers looks particularly bright as the European Union gears up. to launch a stimulus package worth more than a trillion dollars. Copper-intensive renewable energy systems and electric vehicle infrastructure: Nexans SA, one of the world’s leading manufacturers of electric cables, has announced a restructuring that will involve divesting units serving major industrial customers to focus solely on the growth of global electrification Anticipating that growing demand will leave copper in tight supply, the French company is also increasing its processing of recycled copper materials. Even as copper prices rise during the surge in demand, bullish investors say manufacturers will be well positioned to pass the costs on, given the metal’s range of uses in everything from cars, washing machines, wind turbines and grs.In addition, it is often used in small amounts in smartphones , refrigerators and televisions, making it a relatively minor component of the final cost paid by consumers. short term, ”said James Tatum, portfolio manager at New York-based Valent Asset Management by phone. Rising fuel and food prices could prove to be much more pernicious, given their significant weight in household spending. Energy and agricultural commodities are surging, but central bankers are not yet worried with nominal inflation rates still low. “It becomes a problem when reflation turns into inflation, and people just stop doing things because it costs too much,” said Colin Hamilton, managing director of commodities research at BMO Capital Markets Ltd., of London. “I would say we’re getting closer to that point.” For more articles like this, please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP

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