The past few weeks have seen commodity prices head north at a rate of knots, spurring new talk of a fast-approaching ‘supercycle’. Underpinned by a green energy ‘revolution’ and large-scale infrastructure spending, analysts claim, commodities will continue to see demand gather pace in a structural shift which could see prices climbing for the next decade. Even fossil fuels are expected to have their time in the sun as capital expenditure within the sector continues to drop away without a corresponding fall in demand. With the stage now set, investors are weighing up the evidence to assess how they believe commodities will perform in the years ahead. Join us tomorrow for a live investor briefing where we will delve into the investment opportunities within the possible supercycle that experts believe is near. Learn about a unique investment product with the potential to capitalise on the market value of commodities touted to drive the performance of this supercycle. Click here to register.

Supercycle potential in shifting commodities demand story

The rapid increase in copper prices has gripped global headlines over the past several weeks as investors watch to see how high surging demand for the red metal can push its price. The price broke past USD 10,000 in early May on its way to USD 10,724.5 on 10 May – highs not seen in roughly a decade – and has remained in the five-figure range since. It’s not the only commodity to rally in 2021 with aluminium, nickel, zinc, all making gains in the past month alone, while analysts increasingly point to recent moves as signals of a possible ‘supercycle’ in commodities markets. Only four such supercycles have played out the past century, each driven by a structural shift in the demand for commodities – such as post-WWII reconstruction efforts or the rapid urbanisation of China in the 2000s. In each of these instances, demand for commodities grew so quickly that suppliers could not keep pace and prices rallied for around a decade and often longer.

Start your (green) engines

The rally in these metals comes as policymakers the world over are beginning to transition their economies to green energy technologies – which require large volumes of ‘transition’ metals like copper, aluminium, zinc, and nickel. This transition – as well as large-scale infrastructure spending programs implemented as a means of monetary stimulus in the wake of the pandemic – is tipped to underscore demand for key commodities. In the US alone, President Joe Biden has pledged a “once-in-a-generation investment” – valued in the trillions – into green energy technologies and new infrastructure. The UK, European Union, and China have also signalled plans to decarbonise their energy grids as they seek to curb carbon emissions. And with more than 100 nations already committing to become carbon neutral by 2030, the International Energy Agency forecasts the size of the market for critical minerals like copper, cobalt, manganese and various rare earth metals will increase sevenfold in the next nine years.

Further fuel for fossils

The next few years are also forecast to see fossil fuel prices – particularly oil – enjoy similar gains as falling capital expenditure and reduced production capacity push the market into supply shock. The International Energy Forum cautioned in December that currently low levels of capital expenditure within the sector, paired with low investment appetites, pose a genuine threat to markets. Tightening within the market is tipped to push the price of of oil up to USD 60 per barrel next year, with some estimates even suggesting it could go as high as USD 70 or even USD 75. A similar story is expected in natural gas, where production is expected to hold flat despite rising demand – dragging spot prices up with it.

Capitalising on commodities

Reach has access to an investment that provides exposure to the The Diversified Commodities Index. The Index is designed to benefit from a broad-based rally in commodities driven by changing government policy. Investors gain long exposure to a basket of twelve commodities across three distinct commodity sectors – industrial metals, precious metals, and energy. If you would like to know more about this opportunity, register for our live investor briefing tomorrow at 1pm. Book your spot here.   You should read the PDS in full before making any decision on this investment. Any advice is general only and does not consider your objectives, financial situation or needs, and you should consider whether it’s appropriate for you. Reach Markets are the advisors assisting with the management of this offer and may receive fees depending on whether an offer is taken up by investors. Past performance is not an indicator of future performance.   Sources:

• LME.com: LME Copper Historical Price Graph
• ft.com: Broad commodities price boom amplifies ‘supercycle’ talk
• ft.com: China pours money into green Belt and Road projects
• ft.com: How can Boris Johnson hit his ambitious new carbon-cutting target?
• Fidelity International: Is this a commodities supercycle?
• Fortune: Investors are suddenly obsessed with ‘supercycles’
• European Commission: 2030 climate & energy framework
• Forbes: Biden To Split New $3 Trillion Recovery Plan Into Two Proposals, With Infrastructure First On Deck
• Deloitte: Infrastructure as an economic stimulus
• CNBC: The next wave of the global recovery could send commodity prices soaring
• AP News: Biden announces huge infrastructure plan to ‘win the future’
• Reuters: Factbox: Joe Biden’s $6 trillion ambition
• IEA: Net Zero by 2050
• oilprice.com: The Oil Industry Is In Dire Need Of Investment
• oilprice.com: Why Big Oil Expects Record Cash Flow In 2021
• S&P Global: US EIA lifts forecasts for 2021-22 natural gas and power consumption