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

Sterling crashes to its lowest since 1985 after mini-Budget
Currencies

Sterling crashes to its lowest since 1985 after mini-Budget

The pound has fallen hard and is heading towards parity with the US dollar. Saloni Sardana explains why, and what it means for the UK, for markets and…
23 Sep 2022
Earn 3.7% from the best savings accounts
Savings

Earn 3.7% from the best savings accounts

With inflation topping 10%, your savings won't keep pace with the rising cost of living. But you can at least slow the rate at which your money is los…
23 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022
How to use Section 75 credit card protection for your purchases
Credit cards

How to use Section 75 credit card protection for your purchases

Your credit card can give you extra protection when the goods or services you purchase fall short of your expectations. Ruth Jackson-Kirby explains ho…
23 Sep 2022

Most Popular

Paypal, bitcoin, and the weaponisation of money
Bitcoin & crypto

Paypal, bitcoin, and the weaponisation of money

Recent events have shown how both business and governments can “weaponise” money and shut down dissent. What to do? Buy bitcoin, says Dominic Frisby.
22 Sep 2022
Why we should abolish stamp duty – the worst tax in Britain
Tax

Why we should abolish stamp duty – the worst tax in Britain

Stamp duty is Britain’s most horrible tax. We should forget cutting it and abolish it altogether, says Merryn Somerset Webb.
22 Sep 2022
What we know and what to expect from Kwasi Kwarteng's mini-Budget
Budget

What we know and what to expect from Kwasi Kwarteng's mini-Budget

New chancellor Kwasi Kwarteng is to deliver a “mini-Budget”. Nicole García Mérida explains what we can expect to see.
22 Sep 2022