The Commodities Supercycle

As demand shifts, we examine the commodities supercycle and the likelihood of another cycle on the horizon.

Article updated: 11 March 2021 3:00pm Author: Helal Miah

I last wrote about commodities and the mining sector back at the end of January and since then there has been lots written in the media about a commodities supercycle that we may currently be in.

What is a commodities super cycle?

A commodities supercycle as defined by the United Nations is a decades long, above trend movement in a wide range of base materials prices which follows on from a demand shift.

Past supercycles are thought to have occurred when the US industrialised at the turn of the 20th century, the post war reconstruction in Europe, the energy spike in the 1970’s and China emerging as a major economy since the late 1990’s. It is thought that these come as a result of structural changes in the world economies that lead to a rise in demand for commodities and these should be differentiated from price rises that occur as part of the normal economic cycle or short term spikes in demand or supply constraints.

In most previous examples of a supercycle, the oil and energy markets have been the primary beneficiary and led most other commodities higher. However, the 1970’s is unusual in that it was really only the energy markets that rose; this was partly down to supply issues as a result of Middle Eastern turbulence following the Yom Kippur war and thus may not be considered a proper supercyle by some.

The last supercycle started in the late 1990s as China emerged as a major economic superpower. The sheer size of the country and its population, the rapid economic growth and major infrastructure projects saw the country gobble ever larger portions of the world’s key resources. It became the world’s biggest importer of key commodities from energy and key industrial metals to soft commodities such as beef and pork as rising income levels closely relate to rising consumption of meat. The onset of the global financial crisis, the subsequent period of slower growth in China and over investment in capacity by commodity producers is said to have bust this cycle around a decade ago.

Why do investors believe that another supercycle is coming?

Despite the economic crisis caused by the pandemic, key commodities have held up well and some have surged over the last twelve months. Some of that can be put down to China which by western standards seems to have dealt with the virus well and has been able to keep its economy growing. It was the only major economy to register growth during 2020. Meanwhile western central banks and governments have placed huge amounts of stimulus of various forms into their economies, a large portion of this is expected to go towards major infrastructure projects. These projects will consume huge amounts of materials and energy in the process.

However, it is not expected that all commodities prices will benefit equally, as in past cases as spending and structural changes are expected be a little more thematic – the green economy is expected to see the brunt of this spending. Investments into wind, solar and other forms of renewable energy is likely to benefit industrial metals such as copper while the electric car revolution sees copper, aluminium and others such as cobalt and lithium do well. This is likely to come at the expense of lead which is key to combustion engine car batteries.

As a direct result of the green economy and electric cars, fossil fuels may not participate in this longer-term structural growth. Some economists say that peak demand for oil will occur towards the end of this decade before the structural decline for fossil fuel use. Oil producers will therefore want to sell as much of their oil before this happens, thus keeping a lid on any price rises.

We can’t tell if we are in a supercycle at the moment but many say that it can’t last too long, with the key reason being China’s rapid economic growth which will only moderate closer to that of other developed nations; by the early 2030’s it is likely to grow by around 2% rather than the circa 5-6% we have seen in recent years.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment. 

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