The commodity super-cycle that started in the late 1990s is far from over.
The combination of substantially higher absolute levels of demand and the increasing scarcity and rising cost of commodity production will force prices higher over the next 10 to 20 years……..
ETF Securities Research
Nitesh Shah – Associate Director – Research
The industrialisation, urbanisation and rising wealth of large population emerging market countries will continue to drive demand higher.
Although much attention has focused on a potential slowing of China and India growth over the next 10 years, per capita incomes are expected to triple over the coming 20 years, driving substantial increases in per capita consumption of a wide range of commodities.
The long-term supply of most commodities will remain constrained due to their increasing scarcity and rising costs of production.
Higher prices will encourage the more efficient use of the world’s scarce resources and incentivise the investment and innovation necessary to boost supply productivity.
The commodity super-cycle that started in the late 1990s is not over. The primary drivers of the super-cycle are a resource-intensive urbanisation and industrialisation process in large population emerging market countries and a rising cost of production for most commodities. These dynamics are still very much in force. While global economic growth is expected to moderate over the next ten years, rising per capita incomes in large population emerging market countries will drive increasing per capita consumption of a wide range of commodities leading to potentially massive increases in absolute demand for most commodities. Higher commodity prices will be necessary for supply to meet growing demand. Higher prices will incentivise the efficient use of the world’s scarce resources and the investment and innovation necessary to boost high cost exploration and supply productivity.