Are we headed for another Supercycle?
The Economist January 16th 2021, pp57-58 |Finance & economics | Surging commodities “The mountaineers” “Commodity prices are climbing. Is a new supercycle beginning?”
Read the article for all the detail.
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Summary of the Article
Versus January 2020 (Index of 100) what’s happened to commodity prices? Start with oil it tanked to 25 in April, as travel cratered, then climbed to about 70 and in November headed up to 78 where it stands today. Low interest rates have helped Gold rise to about 110 by April shot up to 125 in August and remains. Copper fell to 75 in March, (COVID-related mine closures) and has steadily climbed to 125. Soyabeans fell to about 88 and have since climbed to 150 driven by dwindling demand brought on in part by subnormal South American rain related to the La Nina weather pattern. Many of the commodities have benefited from China rebuilding reserves.
Those bullish on commodities believe that “longer-term trends will support prices through the decade.” Some of that optimism is fueled by COVID essentially synchronizing economies around the world, and a lower dollar reducing prices for American commodities, and a push by many governments to provide more support for the low-income population. Such a boost, should government really take action, clearly would drive demand for commodities and beyond. Even green spending could boost overall economic activity including demand for oil. Skeptics note that topping the first decade of the 21st century is not likely. That “supercycle was driven by urbanization, investment and an ascendant middle class in emerging markets-and China in particular.