Carnage in commodities

Commodity prices have hit their lowest level since the late 1990s. And while there is scope for a rally in 2016, an upturn is unlikely to mark the start of the next long-term up-cycle.

Well, there goes the commodities supercycle of the early 21st century. The Bloomberg Commodity index, which tracks the prices of 22 raw materials, has hit its lowest level since the late 1990s. Down around two-thirds from its 2008 peak, and by a quarter this year, it is heading for the worst of five straight years of declines. All but one of the 22 commodities have fallen in 2015; the outlier has been cotton, up 4%. The worst performance has been natural gas, down 50%.

Healthy supplies, lower demand, and a strong dollar, which weighs on raw materials because they are priced in dollars, have been the main problems.The prospect of higher US interest rates can also hamper commodities they have no yield and thus look less appealing than other assets.

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Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.