How the commodities supercycle will foment unrest around the world

Commodities, including metals, energy and agricultural goods have seen prices climb steadily. With many societies are already on edge, we could see a new round of social unrest around the world.

Are we in a new commodity supercycle? asks The Economist. Many raw materials enjoyed strong gains last year, with copper prices up by more than 25% since the start of 2020 and iron ore surging by 75%. China responded to Covid-19 with an infrastructure-led stimulus plan that turned the country into a “voracious importer” of industrial metals and food. 

As demand spiked, supply contracted; Covid-19 disruption meant Chilean copper mines and Brazilian iron ore excavators were unable to operate at full capacity. Even energy prices are perking up now: a cold winter has sent Asian liquefied natural gas prices to a record high. Bank of America analysts think the trend will continue, notes Zero Hedge. It says that a cocktail of stimulus, reflation and economic reopening should ensure continued robust commodity demand. Copper could end the year at $9,500 a tonne, up from $7,973 now.

Surging food prices are “one of the most dangerous features” of the latest commodity surge, says Albert Edwards of Société Générale in a note. Grain prices have risen more than 50% in just six months. Droughts in South America have worsened the shortages. As in 2011, a central bank “fire-hose” of monetary stimulus appears to be pumping up agricultural markets. The world’s poor might be about to fall victim to a “price momentum” bubble in basic foodstuffs as speculators pile in again.  

Soya bean and rice prices have also taken off, says Eoin Treacy on fullertreacymoney.com. Corn futures have hit a seven-year high. The 2011 Arab Spring was sparked in large part by “the high cost of bread in Tunisia” during the last major agricultural price surge. Societies are already on edge. Now rising food prices could herald a new round of social unrest.

Recommended

When investors get over-excited, it’s time to worry – but we’re not there yet
Sponsored

When investors get over-excited, it’s time to worry – but we’re not there yet

When investors are pouring money into markets, it can be a warning sign of impending disaster, writes Max King. So how are fund flows looking right no…
26 Oct 2021
An investment trust that gives exposure to frontier markets
Investment trusts

An investment trust that gives exposure to frontier markets

An investment trust investing in small, illiquid emerging markets has disappointed, but deserves another chance, says Max King
26 Oct 2021
What does Rishi Sunak have in store for investors this Wednesday?
Budget

What does Rishi Sunak have in store for investors this Wednesday?

Rishi Sunak is unveiling his spending plans for the economy this week. John Stepek analyses areas which may be most hit by the budget.
25 Oct 2021
How rising interest rates could hurt big tech stocks
Tech stocks

How rising interest rates could hurt big tech stocks

Low interest rates have helped the biggest companies to entrench their positions. But what if rates rise?
25 Oct 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021