Too embarrassed to ask: what is a "commodity supercycle”?
A commodity supercycle may sound complicated, but it is a simply a prolonged period of rising prices for raw materials. Here is what it is and how it works.
Commodities – that is, raw materials ranging from oil and copper to cotton and grain – are not typically a large part of a private investor’s portfolio.
Commodity prices are highly cyclical. When prices rise, commodity producers boost supply to take advantage. As supply rises to meet demand, prices fall again in turn, and so on.
Over the very long term, commodities prices tend either to be flat or falling in real terms, because technological improvements lead to more efficient ways of using and extracting raw materials.
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
However, there are periods during which demand rises strongly because of a major change in the global economy. Supply then struggles to keep up as producers adjust to this structural shift.
This leads to a prolonged period of rising prices and investment in supply by commodity producers, until supply has finally grown enough to meet or surpass demand.
This is known as a commodities “supercycle”.
The most recent example came in the early 2000s, when China opened up to world trade, and became a significant force in the global economy.
China’s rapid economic growth saw surging demand for all commodities, as the country pumped money into building roads and railways, and expanding its cities.
That boom lasted – with a brief pause during the global financial crisis in 2008 – right up until 2011, with oil peaking at well over $100 a barrel and copper at more than $4 per pound.
By that time, China’s growth was starting to level off.
However, more importantly, commodity producers such as mining companies had invested so much money on finding more raw materials, that the new supply overwhelmed demand, and prices dropped again.
Today, there are signs that we might be seeing another commodities supercycle, as governments around the world spend heavily to help their economies recover following the pandemic.
The price of copper in particular has shot up, as it is used widely in “green” technologies.
The best way for private investors to get exposure to a commodities boom is through the resource producers themselves – by investing in miners, for example.
However, it’s worth bearing in mind that all such booms come to an end eventually.
To learn more about investing in commodities, subscribe to MoneyWeek magazine.
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.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
What is the 25x retirement rule and does it work?
The 25x retirement rule has been around for decades but many experts question if it is a suitable strategy
-
When is the self-assessment tax return deadline?
If you are self-employed, rent out a property or earn income from savings or investments, you may need to complete a self-assessment tax return. We run through the deadlines you need to know about
-
What's behind the big shift in Japanese government bonds?
Rising long-term Japanese government bond yields point to growing nervousness about the future – and not just inflation
-
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
-
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolio
As the UK recession is confirmed, we look at ways to protect your wealth.