Commodities Market outlook: Iron Ore, Copper to boom amid global inflation

Iron ore futures surged more than 10% and copper jumped to a record amid growing bets they’ll be among the biggest winners from a commodities boom that’s stoking concerns about inflation around the world.

While market participants struggled to pinpoint a trigger for Monday’s gains, they cited several ongoing trends including optimism that central banks will retain supportive policies even as the global economy recovers.

Expectations China will tighten environmental rules have added to the bull case for copper — seen as vital to the green energy transition — and fueled speculation that steelmakers may front-load iron ore purchases before new curbs kick in.

The gains add to a more than yearlong surge in raw-materials prices that has shifted into overdrive in recent weeks.

A “Goldilocks scenario” may be forming as strengthening global growth combines with restrained wage pressures and a dovish Federal Reserve, Goldman Sachs Group Inc. commodities analysts said in a May 7 report, the same day weak U.S. jobs figures added to the case for more stimulus. The risk for bulls — and anyone betting on buoyant returns from stocks and bonds — is that the surge in raw materials feeds through to broader measures of inflation and eventually forces central banks to tighten.

Iron ore futures in Singapore jumped to a record above $226 a ton, extending this year’s gain to about 40%.

Contracts in Dalian climbed by the daily limit when the market opened.

Raw materials producers led gains in the MSCI Asia Pacific Index of regional shares, while Australia’s benchmark equity index was trading near an all-time high. Iron ore is the country’s biggest export earner.

Bloomberg/Hauwa Abu