What raw materials will rise the most in price in 2024, and which stock market will rise the most? Will we really be on a high-flying march in the new year? What is the future of the industry that sank this year or, conversely, the industry that finally saw the light of day this year?
We prepared for the end of the year, a time of settlement and outlook. We select 4 of the 88 letter topics sent throughout 2024 and update them on the current situation and outlook. These are topics that have become a bigger topic since they were introduced by Deep Dive.
*This article is the online version of the Deep Dive newsletter published on the 31st. Subscribe to Deep Dive’s newsletter, ‘Economic news you’ll fall in love with as you read it.’
Cocoa Prices: La Nina is Coming
Shock in cocoa supply from West Africa. It was introduced in a letter dated February 23 (The era of cheap chocolate is over…’Cocoa shock’ and poor farmers). At that time, we reported that cocoa futures prices exceeded $6,000 per ton, and there was even an extreme prediction that it could reach $10,000.
![I thought it was a coin? Cocoa, up 131% this year, Argentine index up 177%[딥다이브]](https://dimg.donga.com/wps/NEWS/IMAGE/2024/12/31/130759380.1.jpg "I thought it was a coin? Cocoa, up 131% this year, Argentine index up 177%[딥다이브]")
This can’t be happening. It wasn’t an extreme prospect. Cocoa prices broke the $10,000 mark in April this year. After that, it slowed down and surprised the industry by exceeding $12,600 per ton on December 18th. Of course, it has since come down again, but it is still worth $9868. This year’s increase rate is 132%. Not only did its price rise the most among all raw materials, but it also matched the rise rate of Bitcoin (142%).
This surge in prices is often said to be due to abnormal weather, but if you go deeper, Blame it on structural problemsThis is big. This is because farmers in Ghana and Ivory Coast are so poor that they cannot afford to prepare for pests and diseases. Unfortunately, even though cocoa prices have risen so much, the situation has hardly improved. Let’s take a look at the chart introduced by Sophie Van Wellen, a researcher at the University of Manchester in England.
Global cocoa prices have risen vertically since the summer of 2023, but the gap with farm prices in Ghana (red line) and Côte d’Ivoire (yellow line) is widening. Because of the decades-old futures contract method (sales in advance 9 to 12 months before harvest), there was little benefit from price increases. For poor African governments, they had to enter into a futures contract to borrow overseas funds using that as collateral to buy cocoa beans and fertilizers, so it was an unavoidable choice until now. They belatedly declared that they would fix this structure, but it remains to be seen whether it will work out well.
Now, where will cocoa prices go in the future? El Niño, the warm ocean current that caused West Africa’s cocoa supply shocks over the past two years, is now over. jigold and silver La Niña, which cools the sea level in equatorial regions, has arrived. Considering the climate alone, it seems likely that cocoa harvests will increase again. The World Bank predicts that cocoa prices will fall by about 13% in 2025 due to improved cocoa supply conditions.
However, it takes several years to cut down already rotten cocoa trees, replant them, grow them, and make them bear fruit. It is not easy to achieve complete normalization. Peter Feld, CEO of Barry Callebaut, the world’s largest chocolate maker, says weather conditions in Africa have clearly improved compared to a year ago, but are still not back to where they were two years ago. I also thought that cocoa prices would not return to the low levels of the past.
Warren Patterson, head of product strategy at ING, agrees. “West African production will rise slightly, but prices will remain historically high next year,” he predicted. For reference, cocoa prices remained below $2,500 per ton for over 10 years until early 2023. There is no prospect that the era of cheap chocolate will ever return.
Plastic Oversupply: Increasingly Larger
Oversupply in the global plastics market is at a dangerous levelWe told you about Iran last April (the onslaught of cheap plastics…this industry seems dangerous). It contained a much bleaker outlook than the market atmosphere at the time (a slight expectation that ‘if China’s economy recovers, there will be hope for the Korean petrochemical industry’). This was because it was believed that oversupply, especially from China, had become the ‘new normal’ for the petrochemical industry.
And the petrochemical industry crisis has become a reality. This year, corporate performance plummeted. Finally, on the 23rd, the government came forward and came up with a plan to improve the competitiveness of the petrochemical industry. The plan is to encourage business reorganization such as factory sales and M&A. This means that the situation is serious enough for the government to take action.
The problem is There is no sign of the current global oversupply being resolved.The point is. Rather, there is a view that the new year will be a real juncture. Consulting firm C-MACC predicts that “new construction in 2025 will add capacity to an already oversupplied market,” and that “the next one to two years will be very difficult for the global chemical industry.” This is because China, which has served as a “large-scale import sinkhole,” is rapidly increasing petrochemical production. “If China’s (petrochemical plant) operation rate increases further, China may become a net exporter.”There is even a view. Petrochemical producers in countries with high production costs, namely Europe, Korea, Japan, and Taiwan, are most at risk.
Of course, petrochemicals are not the only industry in crisis due to oversupply from China. For example, something similar is happening in the steel industry (August Deep Dive Letter: Chinese steel tsunami hits the world).
What is important here is that, unlike China’s steel industry, which is in deficit, China’s chemical industry is still making moneyno see. Most companies have positive cash flow. In other words, from the Chinese government’s perspective, The chemical industry is not in urgent need of restructuring. Therefore, more production capacity will be added in China for the time being, and oversupply will worsen. It’s depressing, but it’s a cold reality.
Argentina’s economy: is it really recovering?
Do you know which country has its stock index rising the most this year? Yes, Argentina. The stock price has risen 177% this year. We already told you that on October 8th, the Argentine stock market jumped 85%, and there is nothing better. (The poverty rate is soaring, but the stock market is up 85%? Argentina’s economy is in chaos). Since then, it has risen by more than 40%.
This is all due to expectations about ‘Chainsaw President’ Javier Millay’s unconventional austerity policies. What happened to the policy that called for ‘zero deficit’ and cut out all civil servants and various subsidies? It’s only been a few months, but the news that has been delivered is surprising. The inflation rate, which reached a whopping 211% per year in 2023, is expected to drop to 119% in 2024.. The poverty rate (rate below 50% of median income), which surprised the world by soaring to 53% in the first half of the year, also dropped to 38.9% in the third quarter. Although the absolute numbers are still high, the decline is quite dramatic.
Regarding this, the Argentine government promotes that “the poverty rate and the incidence of homelessness have decreased thanks to economic policies that have contributed to lowering prices and stabilizing the economy.” Increasing social support such as child allowances was also effective in reducing poverty.
However, the austerity policy of tightening our belts and spending less and eating less has its limits. For a real economy to revive, it is important to attract investment, increase business activity, and increase earned income. President Millay, a liberal, is also active in deregulation and attracting businesses. Aiming at a 30-year tax exemption ‘Large-Scale Investment Incentive System (RIGI)’We are starting to attract foreign companies by creating a .
President Millay was also the first foreign leader that U.S. President-elect Donald Trump met after winning the presidential election in November. Thanks to this meeting, his international reputation further increased. It remains to be seen whether the friendship between the two leaders, who have similar auras, will lead to the signing of a free trade agreement between the two countries as Millay expects, but the atmosphere is not bad.
In a recent interview with WSJ, President Millay said he would continue reforms to make Argentina “the freest country in the world.” As the economy improves, the ruling party’s approval rating will increase in the October 2025 election, and its bold reforms will gain further momentum. He says: “Do not doubt. “I won’t stop.”
Robotaxi: The future is near
The dream of robotaxi, which seemed distant for a while, is being revived.We reported this news last July (Robotaxi, finally making money? Even if the Apple car stops, the driverless car runs). Despite many setbacks and business withdrawals, it was a time when the atmosphere was subtly changing with the emergence of leading players such as America’s Waymo and China’s Baidu.
Afterwards, mixed news came out. Earlier this month, GM announced the suspension of Cruise’s robotaxi business.I did. The news of GM’s withdrawal, which had invested $10 billion over eight years in Cruise, was quite shocking. Cruise founder Kyle Vogt’s passionate response was impressive. “If it was unclear before, it is clear now: GM is a bunch of idiots.”
The timing of GM’s withdrawal was particularly surprising. Google’s Waymo robotaxi performs better than expectedBecause you are doing it. The Waymo robotaxi became available to the general public for the first time in San Francisco in June of this year. Since then, the number of users has more than doubled in three months. This proves that robotaxi works well even in crowded cities.
Waymo has now expanded its commercial services to LA, Austin, and Phoenix. Google CEO Sundar Pichai also announced plans to enter 10 U.S. cities by 2025. Additionally, a new self-driving car using China’s Ziker electric vehicle and Hyundai’s IONIQ 5 will also be introduced. The fully autonomous robotaxi service, which had been at the ‘trial operation’ level for a long time, is really starting to become routine starting this year.I did it.
This is even changing the minds of robotaxi pessimists. Azim Azhar, a famous IT columnist, said in a recent article, “I reflect on past analyzes that said self-driving cars were still a long way from coming.” “Self-driving cars are no longer a ‘useless distraction,’ but are almost ready for prime time. Robotaxi is leading this revolution. There is a growing body of evidence pointing to the adoption and evolution of technology. Robotaxis are starting to break out of the tech bubble.”
Waymo is not alone in this market. Tesla unveiled the ‘CyberCab’ without pedals and steering wheel last October.And we promised again that we would introduce robotaxi. Also acquired by Amazon Zoox plans to open its self-driving shuttle service to the general public in 2025It is. Above all, in Wuhan, China, Baidu’s robotaxi ‘Apollogo’ is already popular due to its amazing economic efficiency, with a fare of as low as 3.9 yuan (about 785 won) per 10 km.
A domestic automobile industry entrepreneur I recently met commented on this: “The difference between companies that focus on short-term performance and stock prices (GM) and companies that invest for the long term (Tesla, etc.)”He explained. Of course, there are still many hurdles to overcome, including regulations, before the robotaxi era truly opens. But wouldn’t the mixed choices in 2024 make a clear difference? By. Deep Dive
Initially, there were more than 10 candidates for topics that could be included in the year-end financial statements. As always, it was obvious that this would get infinitely longer as I continued writing, so I only introduced four. Let me briefly explain the topic that was unfortunately eliminated(?).
Power shortage caused by AI: As AI data center construction increases, power supply is a major issue globally. This trend will accelerate further. Rystad Energy, an energy consulting firm, predicts that data center power consumption will double within 10 years. It is said that the demand for nuclear power generation to meet this demand for electricity will continue. ‘
Intel’s Crisis: Intel, which was aiming to revive the foundry, was unable to speed up the improvement of semiconductor manufacturing technology and fell into difficulties. The stock price fell 57% this year, and CEO Pat Gelsinger announced his resignation. Shareholders even filed a lawsuit against Pat Gelsinger, claiming he lied about the foundry business. It doesn’t seem like anything is going to work. There are even pessimistic predictions that the current stock price of $20 will fall to $10.
*This article is the online version of the Deep Dive newsletter published on the 31st. Subscribe to Deep Dive’s newsletter, ‘Economic news you’ll fall in love with as you read it.’
