With commodity prices regaining pandemic-related losses, and some reaching highs last seen a decade ago, many observers think this is the start of a new commodity supercycle. Oxford Economics disagrees.
The recent price spikes are due to reduced supply amid severely disrupted mines and supply chains. Plus, a quick recovery in industrial production and robust global monetary and fiscal stimulus measures have increased demand.
However, while Oxford Economics expects vibrant global economic growth over coming years, the magnitude of commodity demand growth will not be the same as during the turn of the millennium, when China’s rapid industrialization and urbanization increased and powered the last supercycle.
Partly supporting prices has been speculation, boosted by positive vaccine developments that improved this year’s outlook and raised consumer confidence. Commodity markets have benefited from ample global liquidity, which has lifted all assets classes.