View from the outer: Green metal supercycle

BY , ,   |  THURSDAY, 16 JUN 2022    3:15PM

Green metal supercycle

The recent jump in a broad range of commodity prices raises the question of whether we have entered a new commodity supercycle.

Even though these are very different markets, prices broadly moved down together from around 2012, reached troughs in 2016 and have recently been rising together. Note that even though the Russian invasion of Ukraine has been the most recent driver of rising prices, the uptrend was already in place.

Most commodity prices had started to rise materially from mid-2020 assisted by a demand spike from COVID-19 stimulus and supply disruption linked to COVID-19 disruptions.

This would be 7th supercycle of the past 200 years and follows quickly on the heels of the last one that ran from 1998 to 2012. These are identified in Figure 2 that illustrates the rolling 10-year average price changes. It is based on an index of US metals prices.

Commodity supercycles are extended periods of price gains and losses where a broad range of commodities follow similar paths. Commodities are particularly prone to extended cycles because supply can take some time to respond to changing demand given the lead times in exploration and mine development.

Commodity cycles have typically lasted 15-20 years. There have been six such cycles over the past 200 years and four since 1990.