Gas flaring. Torch against the sky.
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Wonky supply chains aren’t the only factor driving commodity prices higher this year, Fitch Ratings says, given other pandemic-related factors have played a role.

In a new report, the rating agency said that the boom in commodities over the past year has reflected not only supply issues, but also several other global macro factors including: the restart of economic activity as public health restrictions eased; rebounding industrial production; and large fiscal and monetary supports.

The early recovery of the Chinese economy and weakness in the U.S. dollar also contributed to the commodity boom.

While supply disruptions are still in play, now many of the other macro factors driving commodity prices are ebbing, Fitch said.

“China’s property market is cooling, the pace of global industrial production growth is slowing, the U.S. dollar has started to strengthen and global U.S. dollar credit flows are weakening,” said Robert Sierra, director in Fitch’s economics team.

Fitch said that the slowdown in China’s property market has already produced a drop in iron ore prices. And, as monetary conditions tighten, the U.S. dollar is gaining strength, which also signals less support for commodity prices.

Additionally, “Commodity price movements have started to become more divergent recently,” Fitch said.