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Why we are not in a new commodity supercycle

The latest rally in many commodity prices has prompted some commentators to herald the arrival of a new commodity supercycle. In this Commodities Watch, we outline what is meant by a supercycle and discuss why we are not at the start of a long-run bull market in commodity prices. In our view, a prolonged surge in metals prices is likely as efforts to decarbonise the world economy take effect, but we are sceptical that it is already underway.

Caroline Bain Chief Commodities Economist
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Commodities Weekly Wrap

Pressure from rising Treasury yields likely to resume

This week the prices of most commodities got a boost as investors pared back expectations for rate hikes in the US, following lower than expected inflation data. That said, we still expect a further small rise in the US 10-year Treasury yield by the end of the year, which could put renewed downward pressure on the prices of commodities, and particularly gold, in the coming months. Supply disruption caused by the war in Ukraine seems to be easing, as grain ships have continued to leave Ukrainian ports. Meanwhile, there were renewed efforts to revive the 2015 Iran nuclear deal. While there are still hurdles, if a deal were agreed, we would expect a rapid rise in Iranian oil output, which would weigh on oil prices. Next week, we’ll be paying close attention to the latest activity and spending data from China on Monday. We expect that the data will show that the post-lockdown recovery lost steam in July, alongside a renewed deterioration in the property sector, which could weigh on industrial metals prices next week.

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Commodities Update

Gloomy outlook for use of agriculturals in industry

Deteriorating global economic growth over the coming quarters will weigh on industrial demand for cotton, natural rubber and lumber. That said, high oil prices will offer some support to cotton and natural rubber prices, and our expectation for rate cuts in the US in late 2023 could boost the price of US lumber.

10 August 2022

Commodities Update

China’s copper imports are the only bright spot

Commodity import volumes remained lacklustre in July, consistent with subdued activity in heavy industry and construction. We think import growth should tick up in the coming months in response to higher infrastructure spending and a modest pick-up in activity. But renewed lockdowns pose a downside risk. Oil and the Gulf Drop-In (9th Aug): What’s the outlook for oil prices and what does that mean for Gulf economic outperformance? Join economists from our Commodities and Emerging Markets teams for this 20-minute briefing. Register now.

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More from Caroline Bain

Commodities Update

China PMIs herald a period of slower growth

China’s June survey data show softer growth in activity and supports our forecast that economic growth will slow from here, which will weigh on the prices of most commodities, especially the metals.

1 July 2021

Energy Data Response

US Weekly Petroleum Status Report

US crude stocks fell for the sixth consecutive week amid the ongoing rebound in product demand as the virus-related restrictions continue to be lifted. That said, if OPEC+ decide to gradually raise output from August (as we expect) and US import volumes pick up, stocks may stabilise in the coming months.

30 June 2021

Industrial Metals Update

Making sense of the rise in exchange stocks

Exchange stocks of base metals have risen this year, which usually suggests that markets are well supplied. But much of the recent build in stocks has been opportunistic and driven by financial considerations rather than a surplus in the market. Regardless, we think that supply of most metals will pick up in the coming months, which should boost stocks further and weigh on prices.

29 June 2021
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