Commodities Super Cycle - Do you believe in it?

[jonojpsg]

Personally, having read a fair bit about peak oil and from the apparent inability of producing nations to increase production, I am not surprised at all at oil moving the way it has.

I remember one show, albeit fictional, I think it was 2013: Oil no more or something like that. Anyway, there were a couple of commodoties traders who jumped on oil and bought 200000 barrels at $110 a barrel and watched gleefully as it soared over the next couple of days to $150 a barrel. They got caught tho as the major governments, eg G7, jumped in and suspended trading in oil.

ANyway, it is well before 2013 and it looks like our $150 a barrel is well within reach.

 

[greggles]

Fifteen years later, are we back in the midst of a commodities super cycle?

Are We Witnessing the Start of a New Commodities Supercycle?

www.institutionalinvestor.com

 

[Dark1975]

Fifteen years later, are we back in the midst of a commodity super cycle?

Are We Witnessing the Start of a New Commodities Supercycle?

www.institutionalinvestor.com

View attachment 123797

I wish we had a crystal ball ?
Tho unless fiscal policy changes, and if interest rates remain on hold,
I'm running with commidites/ crypto and stock until it pops.
Trend is your friend ?
Tho i guess this could all change in 3mths once they release the proper inflation figures ?? which apparently haven't moved ?
Sshhh apparently inflation is 2-3% p.a ?

 

[greggles]

I wish we had a crystal ball ?
Tho unless fiscal policy changes, and if interest rates remain on hold,
I'm running with commidites/ crypto and stock until it pops.
Trend is your friend ?
Tho i guess this could all change in 3mths once they release the proper inflation figures ?? which apparently haven't moved ?
Sshhh apparently inflation is 2-3% p.a ?

There is talk in the US of rising inflation even though the Federal Reserve is trying to hose it down. Warren Buffet recently referred to it as hyperinflation, which means that he is taking it seriously.

My understanding is that in times of high inflation, investors turn to hard assets such as commodities and real estate as inflation increases the price of those assets (and the cost to produce them). Governments in the west have been printing a hell of a lot of money in the last 12 months. This must also have an effect on the buying power of those currencies. It seems inevitable that in this economic environment it is only natural that prices will increase.

Perhaps we are entering a phase where the key to investment success is identifying the commodities that will rise in price the most in the short to medium term due to high demand and lack of supply and then pinpointing those companies that are producing those commodities for the lowest possible price.

 

[rederob]

Perhaps we are entering a phase where the key to investment success is identifying the commodities that will rise in price the most in the short to medium term due to high demand and lack of supply and then pinpointing those companies that are producing those commodities for the lowest possible price.

The commodity price does not need to rise that much, depending on the product and its margin, where volumes are strong and the cycle is long.
I have found that one of the biggest difficulties in the minerals area is getting consistent data for comparison as the number of variables is large.
Here's some info regarding what to look for with an iron ore producer.
That said, the crystal ball for determining which commodity will increase more, and/or for how long, gets shattered on a regular basis.
Right now anything to do with battery production and electrification probably has the better chance of lasting, so I have been advocating a case for copper in another thread.
Iron ore is in the stratosphere right now, and I hope it gets a soft landing when demand is back to normal (whatever that is!).
I am not sure we can really call where we are at "a supercycle" as apart from China the remaining global demand will be largely driven by post-covid stimulus and not an enduring period of global economic growth. Once that splurge is over it's hard to see demand sustaining itself.

 

[greggles]

The commodity price does not need to rise that much, depending on the product and its margin, where volumes are strong and the cycle is long.
I have found that one of the biggest difficulties in the minerals area is getting consistent data for comparison as the number of variables is large.
Here's some info regarding what to look for with an iron ore producer.

Agree with you about this.

That said, the crystal ball for determining which commodity will increase more, and/or for how long, gets shattered on a regular basis.
Right now anything to do with battery production and electrification probably has the better chance of lasting, so I have been advocating a case for copper in another thread.

I think this comes down to research and requires a lot of forward thinking and extrapolation. Which industries that require a certain commodity as part of production are in their infancy and look likely to experience explosive growth? It's hard to stay ahead of the pack and it requires a lot of investigation and reading. I'm starting this process now to try and predict booming markets and commodities but it's hard going. Still, nothing comes easy.

Iron ore is in the stratosphere right now, and I hope it gets a soft landing when demand is back to normal (whatever that is!).
I am not sure we can really call where we are at "a supercycle" as apart from China the remaining global demand will be largely driven by post-covid stimulus and not an enduring period of global economic growth. Once that splurge is over it's hard to see demand sustaining itself.

People (the media mostly) are talking about Biden's upcoming infrastructure spending spree - if it is passed by Congress - and the impact that will have on commodity prices due to the demand created. Western economies are going to try and spend themselves out of the impact COVID-19 has had on their economies and that will create a huge demand for base metals and other commodities as well. I think we are still near the beginning of this growth phase and there is considerable growth still to come. Pinpointing where that growth will be greatest and sustain the longest is the tricky part.

 

[rederob]

Agree with you about this.

I think this comes down to research and requires a lot of forward thinking and extrapolation. Which industries that require a certain commodity as part of production are in their infancy and look likely to experience explosive growth? It's hard to stay ahead of the pack and it requires a lot of investigation and reading. I'm starting this process now to try and predict booming markets and commodities but it's hard going. Still, nothing comes easy.

People are talking about Biden's upcoming infrastructure spending spree - if it is passed by Congress - and the impact that will have on commodity prices. Western economies are going to try and spend themselves out of the impact COVID-19 had had on their economies and that will create a huge demand for base metals and other commodities as well. I think we are near the beginning of this phase and there is considerable growth still to come. Pinpointing where that growth will be greatest and sustain the longest is the tricky part.

As you said, research, forward thinking and extrapolation are needed.
Of the miners looking really interesting, Lynas Corp fits my bill. It's doubled its pre-pandemic price and its late-2020 recent capital raising has set it up to star in the expanding digital and green economies. If the US/China trade war hots up then I see Lynas being a major beneficiary.
LTC's chart to me suggests some consolidation or even downwards price movement in the near term so maybe worth picking up on the next big general move down on the ASX.
Aside from that, there are so many "possibles" during a commodity boom that over the next year it might be hard to go wrong.

 

[greggles]

Found this on Twitter today, got a chuckle out of it and thought it was best suited to this thread. The author currently puts us at 10 o'clock on the commodity investment cycle, and I think that's probably pretty close to the mark. Maybe 9:30.

 

[Gunnerguy]

Found this on Twitter today, got a chuckle out of it and thought it was best suited to this thread. The author currently puts us at 10 o'clock on the commodity investment cycle, and I think that's probably pretty close to the mark. Maybe 9:30.

View attachment 124036

Greg goes,
Thanks for this. Having worked in the oil industry for 30 years, and read all about ‘Peak Oil’ this particulate diagram reminds me of all the ups and downs of the oil industry. Over the last 20 years.
Great diagram!
Gunnerguy

 

[Smurf1976]

Not only the effects of inflation on commodity demand but also on the production side need to be considered.

Quite a few have noted that if it wasn't for incredibly cheap money, the US shale industry quite likely wouldn't have gotten anywhere at all. It simply doesn't produce a return on capital that would stack up in a world of 10% yields on high quality debt and somewhat higher on low quality for example, it stacks up only because investors are willing to throw money at anything that's even slightly above zero.

Worth noting in that context that oil at $65 per barrel is high by historic standards, indeed adjusted for inflation it's almost exactly the same as the price which followed the 1973-74 oil embargo and which was widely termed a "crisis" at the time, even bringing a UN response in due course. It has been higher yes, but today's price most certainly isn't low if viewed in terms of the industry's overall historical context.

The broader financial situation is something to consider in all of this. Cheap credit fuels a lot of things, commodity production included, that otherwise wouldn't likely take place.

 

[waterbottle]

Here's one article arguing that these prices are likely not sustainable :

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www.northernminer.com

 

[rederob]

Here's one article arguing that these prices are likely not sustainable :

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You’ve reached your limit of free weekly articles. Enjoy 4 weeks of unrestricted access: Register for a free trial Subscribe for as low as $2.19...

www.northernminer.com

Good balance of perspectives.
Neither copper nor iron ore are in "extreme deficit" just yet and demand might just be a post-covid hangover as a semblance of western economy recovery is underway.
Aluminium, zinc, lead and nickel appear to be hangers on and their price increases will be best held against inflation.
I think for a supercycle to be sustainable we need India to do a China, concurrent with broader African development/industrialisation. As the article suggests, that's a few years away at best.

 

[greggles]

I’ve been doing this 30 years and I’ve never seen markets like this. This is a molecule crisis. We’re out of everything, I don’t care if it's oil, gas, coal, copper, aluminium, you name it we’re out of it.

Jeff Currie, Head of Commodities Research at Goldman Sachs Group.

Goldman commodity veteran sees unprecedented pricing due to shortages

Jeff Currie says in 30 years’ trading he’s never witnessed anything like current conditions

www.businesslive.co.za

Just saw the above quote in another thread. I brought this up nine months ago in this thread, but it looks like commodities prices are continuing to gather momentum. As far as hard assets go, real estate looks cooked. With commodities being undersupplied it looks like the next logical place for the big players to park cash. Copper, oil, gold, lithium, nickel, rare earths, all on bullish runs. No reason why it can't continue throughout 2022.

 

[frugal.rock]

Copper, oil, gold, lithium, nickel, rare earths, all on bullish runs.

I have similar sentiment, however, timing entries are key.
Rotation is rife so the contrarian trade is looking good.
What's up this week could be down next, and vice versa.
Without the timing bit, one might get stuck holding a sudden drawdown for a while. ?

With oil heading up, everything battery related should have a good year as the scramble for battery metals continues.

 

[Sean K]

Jeff Currie, Head of Commodities Research at Goldman Sachs Group.

Goldman commodity veteran sees unprecedented pricing due to shortages

Jeff Currie says in 30 years’ trading he’s never witnessed anything like current conditions

www.businesslive.co.za

Just saw the above quote in another thread. I brought this up nine months ago in this thread, but it looks like commodities prices are continuing to gather momentum. As far as hard assets go, real estate looks cooked. With commodities being undersupplied it looks like the next logical place for the big players to park cash. Copper, oil, gold, lithium, nickel, rare earths, all on bullish runs. No reason why it can't continue throughout 2022.

Boring old Tin has been on a blinder for a year or so.

 

[Dona Ferentes]

Handy site for commodity numbers

Commodity Prices - Price Charts, Data, and News - IndexMundi

www.indexmundi.com

Click on a commodity from the list on the left to view its full price history

 

[qldfrog]

funnily (?) enough, miners taking a beating today, asx up just because of the big 4 banks

 

[divs4ever]

actually i was blaming the gold miners for my slightly green tint ( which was a shame , i had some buy orders in )

 

[divs4ever]

Code: Stock code or name
holding goldies Mon 14 Feb 2022 4:41 PM Sydney time

Code	Bid ($)	Offer ($)	Last ($)	Change ($)	(%)	Open ($)	High ($)	Low ($)	Volume			Actions
AGG ​	5.650​	5.660​	5.660​	0.190​	3.47​	5.600​	5.660​	5.550​	16,760​	​	​	BUY | SELL
AIS ​	0.135​	0.145​	0.140​	-0.010​	-6.67​	0.145​	0.150​	0.135​	7,971,205​	​	​	BUY | SELL
EVN ​	3.940​	3.960​	3.960​	0.290​	7.90​	3.920​	4.020​	3.860​	12,149,286​	​	​	BUY | SELL
GOR ​	1.425​	1.430​	1.430​	0.070​	5.15​	1.415​	1.465​	1.415​	3,173,584​	​	​	BUY | SELL
KRM ​	0.075​	0.077​	0.077​	0.004​	5.48​	0.075​	0.078​	0.074​	938,123​	​	​	BUY | SELL
MML ​	0.730​	0.750​	0.730​	0.035​	5.04​	0.705​	0.735​	0.700​	2,063,679​	​	​	BUY | SELL
NST ​	9.000​	9.010​	9.000​	0.500​	5.88​	8.910​	9.210​	8.850​	10,119,561​	​	​	BUY | SELL
OGC ​	2.280​	2.300​	2.280​	0.160​	7.55​	2.260​	2.360​	2.260​	677,937​	​	​	BUY | SELL
OZL ​	25.650​	25.720​	25.700​	-0.180​	-0.70​	25.750​	25.855​	25.210​	1,514,662​	​	​	BUY | SELL
RMS ​	1.485​	1.490​	1.485​	0.105​	7.61​	1.445​	1.510​	1.445​	5,754,129​	​	​	BUY | SELL
RRL ​	1.980​	1.990​	1.990​	0.150​	8.15​	1.925​	2.040​	1.920​	7,660,593​	​	​	BUY | SELL
TRY ​	0.000​	0.000​	0.037​	0.000​	​	0.000​	0.000​	0.000​	0​	​	​	BUY | SELL
WGX ​	2.020​	2.030​	2.030​	0.085​	4.37​	2.020​	2.090​	2.010​	1,431,163​	​	​	BUY | SELL

 

[qldfrog]

yes I know PM went very well:

but my system stocks: mostly small caps and miners lost 2% today overall
and even at the ASX200 level: materials were smashed today

but this is probably just noise and opportunities...