- June 1, 2021: Vol. 8, Number 6

Observers disagree whether commodities have entered a supercycle

by Andrea Zander

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 most recent 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.

Energy markets have plenty of spare capacity, which will keep a lid on price increases over the medium term. Gold has already started to move lower amid improving optimism over economic growth. And the trends that saw iron ore surge last year look set to reverse, as China plans to reduce steel production and Brazilian iron ore exports pick up.

However, commodities linked to the green-energy transition have upside potential in the long run. Copper looks particularly well-positioned to benefit because it faces few substitutes, and electric vehicles require three times more copper than do traditional vehicles.

In other commodities news, Bloomberg reported that diners’ chicken craze has the United States running low on poultry. Chicken, the most popular meat among U.S. consumers, is finding a new level of demand after Popeyes introduced a sandwich in 2019 that went viral and sold out in weeks. The frenzy has now caught on at other chains as well, with McDonald’s and KFC reporting their new fried-chicken sandwiches are selling well beyond expectations.


Andrea Zander is website content editor at Institutional Real Estate, Inc.

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