Commodities boom spreads beyond energy and metals
Commodity prices are soaring – oil, gas, copper and a whole host of metals has seen prices take off. But price rises are spreading to soft commodities too.

“There has rarely been a better time to add commodities to a portfolio as a hedge against inflation, geopolitical risks and potentially hostile market environments,” says Jeffrey Currie of Goldman Sachs. The S&P GSCI index, which tracks a basket of 24 major commodities, has risen 35% over the past year and analysts see more gains ahead.
Bulls such as Goldman point to “extremely tight inventories, underinvestment across the commodity sector and slow-responding supply”, says Alex Gluyas in the Australian Financial Review. The rise of environmental, social and governance (ESG) investing means that while “capital has never been cheaper due to low interest rates, it has never been more expensive to build infrastructure and equipment such as mines, steel mills”, or drill for an oil and gas well.
The shortages are broad based. “Copper stocks at major commodity exchanges sit at just over 400,000 tonnes, representing less than a week of global consumption,” say Neil Hume and Emiko Terazono in the Financial Times. Citigroup analysts think demand for lithium, which is used in electric car batteries, will exceed supply by 6% in 2022. It’s not just metals either. Stockpiles of arabica coffee, “the higher-quality bean loved by espresso aficionados”, are at their lowest level in 22 years. US Soybean prices are up 18% this year already. Wheat prices have also risen on fears that major exporters Russia and Ukraine are about to descend into war.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Aluminium takes flight
Then there’s aluminium, says Laurence Girard in Le Monde. The metal is used in everything “from coffee capsules to cans to aeroplane cabins”. It also plays a key role in the infrastructure needed to decarbonise the economy. Last week it hit a 13-year high on the London Metal Exchange at $3,236 a tonne. The metal is up 16% already this year and not far off its all-time high of $3,380 a tonne.
The squeeze is a consequence of soaring energy prices that have seen European and Chinese smelters cut production. “On average, producing a ton of aluminium uses the same electricity as an average US family consumes in [a] year,” says Javier Blas on Bloomberg. Aluminium’s extensive presence in our daily lives means that the price rally will be another source of inflation across the economy.
The 67 million tonne a year market ran a deficit of more than one million tonnes last year. That should continue. China accounts for “nearly 58%” of the market, but the industry is under pressure to cut pollution and energy usage. High electricity prices elsewhere mean there are few producers ready to step in, while the electrification of ever more of the economy means a growing number of products contain the metal. Hence Goldman predicts prices could hit $4,000 a tonne within the next 12 months.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Palmer Luckey: the billionaire flame of the west
Profile Palmer Luckey started Oculus, the virtual-reality headset business, and sold it to Facebook for $2bn. Now he’s set his sights on the arms race.
By Jane Lewis Published
-
How to play the global LNG boom with Cheniere Energy
Cheniere Energy is expanding to grab a share of a growing market
By Rupert Hargreaves Published
-
How to invest in battery metals
Despite recent weakness, battery metals that are powering electric vehicles are worth a look
By David J. Stevenson Published
-
Invest in Glencore: a cheap play on global growth
Glencore looks historically cheap, yet the group’s prospects remain encouraging
By Rupert Hargreaves Published
-
Volkswagen mulls closure of German factories
Why is Volkswagen considering the closures and how is the carmaker performing?
By Dr Matthew Partridge Published
-
How to trade commodities using spread betting and CFDs
Commodities such as energy, metals and foods behave differently to stocks and bonds. Learning how to trade them can open up new opportunities to profit from volatility
By Eoin Treacy Published
-
Gold or silver: which is the better bet?
Should you invest in gold or silver? Or should you own equal amounts of the precious metal?
By Dominic Frisby Published
-
BP is moving away from its oil output target
Oil giant BP has retreated further from its target to cut oil output. Where does that leave the sector’s net-zero credentials?
By Dr Matthew Partridge Published
-
Commodity prices remain high – should you buy into the boom?
Commodity prices are high – what does this mean for the 'everything rally'?
By Alex Rankine Published
-
The evolution of the car industry
The car industry has faced sluggish sales and low levels of demand, which has thrown a spanner in the works of global car makers. But is it short-lived?
By Dr Matthew Partridge Published