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todayMarch 21, 2023
Is the Commodity Supercycle Over?
As we move into the second quarter of 2023, commodity prices remain a hot topic among investors and analysts. The pandemic has caused significant volatility in the markets, but what does the future hold for commodities? Are we in the midst of a supercycle, or is it coming to an end? A recent poll run by Commodities People conducted on the issue revealed that a significant percentage of respondents (47%) remain uncertain, citing conflicting factors as the primary reason for their ambiguity.
On the other hand, an optimistic 33% of respondents believe that the commodity supercycle is still going strong, and they predict that prices will continue to rise in the coming years. Meanwhile, a minority of 10% of respondents believe that the supercycle is already over and that prices will stabilise, while another 10% predict a decline in commodity prices.
Deciding whether the commodity supercycle has concluded is a multifaceted matter. Commodity supercycles are uncommon and generally stem from fundamental changes on a global scale. The present escalation in commodity prices may be the beginning of a new supercycle or just momentary cyclical rises influenced by different factors, such as the ongoing conflict from Russia’s war on Ukraine.
The recent geopolitical tensions and trade finance challenges of 2023 have had a significant impact on the commodity markets, making it challenging to predict with certainty what the future holds. Such instability may lead to future market disruptions, which could cause prices to remain high until the end of 2024.
China, the world's largest consumer of commodities, is experiencing a shift in its economy, with a focus on domestic consumption rather than exports. China's shift in focus from exports to domestic consumption is a major influence on the commodity markets. The country's economic growth was previously driven by exporting goods, fueling the demand for raw materials and commodities. However, China's economy has slowed down, prompting a change in focus to developing the domestic market. This shift is expected to continue, with China becoming the largest consumer of commodities worldwide.
This shift will lead to changes in demand for certain commodities, such as increased demand for lithium, cobalt, and copper due to China's transition towards renewable energy sources and electric vehicles. Additionally, China's reduced reliance on imports as it becomes more self-sufficient may lead to decreased global demand for certain commodities, which will impact prices.
The ongoing war on Ukraine has already caused significant disruptions in agricultural markets, resulting in future market disruptions. The World Bank has warned that the war in Ukraine is changing the pattern of trade, production, and consumption of basic products, leading to sustained high prices until the end of 2024. According to The World Bank, the war in Ukraine jeopardised more than one-third of world wheat trade, 17% of world maize trade, and almost 75% of world sunflower trade, leading to export-limiting measures such as quotas, licences, and outright bans.
Respondent Lamia Sayari Riabi CDCS, Head Trade Finance Department at Attijari Bank said, “Commodities supercycles are a relatively rare phenomenon. Usually driven by structural change across the world, it can last for decades ; where commodities trade above their long-term price trend over a long period. We could say that what we are witnessing, such a broad surge in commodity prices, is a supercycle kick off, or just a temporary cyclical upswing driven by various phenomena such as the Ukraine-Russia war. As Russia’s invasion of Ukraine continues, uncertainty remains in agricultural markets. Such instability may lead to future market disruptions, which can be seen by The World Bank report, which emphasises that the war in Ukraine is changing the pattern of trade, production and consumption of basic products, which should keep prices at high levels until the end of 2024. As a consequence, export-limiting measures have been implemented, causing price distortion. It has been estimated that those restrictions covered more than 11% of global food trade in 2022, with export bans alone responsible for 3.8%.”
The changing face of commodity markets is also worth considering. New players and rules are emerging, driven by the influx of new money and markets. A shift towards sustainable investments and ESG concerns has caused investors to look for ways to incorporate ESG into their commodity portfolios. With the rise of digital technology and the increasing use of blockchain in the commodity trade, we are seeing a new era of innovation in the sector. These developments are causing significant disruptions in traditional commodity trading practices and paving the way for new opportunities and growth.
However, the acceleration of a new mega-trend, the transition to a low-carbon economy, may be a catalyst for a new commodity supercycle. Climate change and climate risk pose significant threats to the global economy, and as such, the Paris Agreement and the UN's Sustainable Development Goals (SDGs) must be met.
Lamia Riabi said, “The transition to a low-carbon economy will last for decades, and it will impact commodities in different ways. Different raw materials will be affected differently depending on their exposure to climate risk and transition risk. The switch to low-carbon energy is already providing a high demand for raw materials needed to build renewable energy infrastructure and produce the batteries used in electric vehicles.”
In conclusion, while the poll results may be somewhat mixed, it is clear that the commodity supercycle is far from over. With geopolitical uncertainties, new money, markets, rules, and players, and the looming transition to a low-carbon economy, the commodities market is poised for significant changes in the coming years. For those interested in staying ahead of the curve, attending Commodity Trading Week in London on the 25th-26th April 2023 at the QEII Centre is a must.
The event provides an excellent opportunity for professionals to network, share insights, and stay up-to-date with the latest industry developments. Registering for this event is a must for any commodity professional looking to stay ahead of the curve in these uncertain times.
Register here: https://commoditytradingweek.com/tickets/.
Written by: Commodities People
labelAll Posts todayMarch 21, 2023
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ABOUT MOLECULE
Molecule is the modern and reliable ETRM/CTRM. Built in the cloud with an intuitive, easy-to-use experience at its core, Molecule is the alternative to the complex systems of the past. With near real-time reporting, 30-plus integrations, and headache-free implementations, Molecule gets your ETRM/CTRM out of your way – because you have more valuable things to do with your time.PARTNER
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We are RadarRadar (formerly Tradesparent). Experts in the commodity trade and processing industry. Operating in the most fundamental industries of the world, food, energy and other commodities. Since 2010, we deliver high profile projects for the world’s leading commodity producers, traders, and processors. We work with our clients to configure bespoke and extendable data solutions, enabling their successful digital transformation.SPONSOR
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SOS MEDITERRANEE is a European, maritime-humanitarian organisation for the rescue of life in the Mediterranean. It was founded by European citizens who chartered a rescue vessel in order to save people in distress in the Central Mediterranean – the in the world’s most deadly migration route. Our four headquarters are located in Berlin (Germany), Marseilles (France),
ABOUT WISTA Switzerland
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WISTA Switzerland is a key global shipping and trading hub, with regional clusters in the Geneva Lake area, Zug/Zurich and Locarno. The shipping and trading activity in Switzerland provides over 35’000 jobs and represents 3.8% of the Swiss GDP. Switzerland, and Geneva in particular, is also home to international organisations such as the World Trade Organization (WTO) and the European Free Trade Association (EFTA) and the United Nations Conference on Trade and Development (UNCTAD).
WISTA Switzerland was founded in Geneva in 2009 and incorporated according to the WISTA International statute in January 2010. The Association is active in both Geneva and Zug/Zurich chapters with the Board and Members meeting monthly to discuss topics of interest, exchange ideas and experiences. We also meet for networking events, conferences and member exclusive coaching sessions.Every year, several conferences are organized by Wista Switzerland on latest developments in the industry in both areas Geneva and Zug/Zurich.
Founded in 1983, the Club has been actively involved in the local and international Shipping and Trading community and presently is proud to have about 160 members including individuals working as shipowners, traders, charterers, logistics providers, agents, banks, insurers and lawyers as well as a large number of companies active in the market.Geneva is a global hub for Shipping and Trading and in an industry where network is key to one’s individual and to the industry’s success, the Propeller Club serves a vital role.
The Propeller Club organises a range of events which are open to the Shipping and Trading community both in Geneva and those visiting for work or pleasure. These events include monthly evening events focused on specific topics combining learning and networking opportunities. On a more social level, the Club organises networking events such as our annual events to celebrate Escalade, an annual outing on the Neptune on Lake Geneva and a summer lunch. The Club also organises drinks events to promote networking in the larger community.
The Propeller Club is in close contact with Propeller Clubs in ports and cities throughout Europe and further afield to coordinate our activities and to create value for the broader network.
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The Propeller Club – Port of Geneva is a professional association providing opportunities for Shipping and Trading professionals to network and develop their knowledge.
Founded in 1983, the Club has been actively involved in the local and international Shipping and Trading community and presently is proud to have about 160 members including individuals working as shipowners, traders, charterers, logistics providers, agents, banks, insurers and lawyers as well as a large number of companies active in the market.Geneva is a global hub for Shipping and Trading and in an industry where network is key to one’s individual and to the industry’s success, the Propeller Club serves a vital role.
The Propeller Club organises a range of events which are open to the Shipping and Trading community both in Geneva and those visiting for work or pleasure. These events include monthly evening events focused on specific topics combining learning and networking opportunities. On a more social level, the Club organises networking events such as our annual events to celebrate Escalade, an annual outing on the Neptune on Lake Geneva and a summer lunch. The Club also organises drinks events to promote networking in the larger community.
The Propeller Club is in close contact with Propeller Clubs in ports and cities throughout Europe and further afield to coordinate our activities and to create value for the broader network.
Gafta is the international trade association representing over 1900 member companies in 100 countries who trade in agricultural commodities, spices and general produce. Gafta is headquartered in London and has offices in Geneva, Kiev, Beijing and Singapore. More than 90% of Gafta’s membership is outside the UK. With origins dating back to 1878, Gafta provides a range of important services that facilitate the movement of bulk commodities and other produce around the world.
It is estimated that around 80% of all grain traded internationally is shipped on Gafta standard forms of contract and Gafta’s arbitration service, based on English law, is highly respected around the world. Gafta also runs training and education courses, manages Approved Registers for technical trade services and provides trade policy information, and events and networking opportunities for members.
Gafta promotes free trade in agricultural commodities and works with international governments to promote the reduction of tariffs and the removal of non-tariff barriers to trade, as well as a science and evidence-based approach to international trade policy and regulatory decision making.
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Gafta is the international trade association representing over 1900 member companies in 100 countries who trade in agricultural commodities, spices and general produce. Gafta is headquartered in London and has offices in Geneva, Kiev, Beijing and Singapore. More than 90% of Gafta’s membership is outside the UK. With origins dating back to 1878, Gafta provides a range of important services that facilitate the movement of bulk commodities and other produce around the world.
It is estimated that around 80% of all grain traded internationally is shipped on Gafta standard forms of contract and Gafta’s arbitration service, based on English law, is highly respected around the world. Gafta also runs training and education courses, manages Approved Registers for technical trade services and provides trade policy information, and events and networking opportunities for members.
Gafta promotes free trade in agricultural commodities and works with international governments to promote the reduction of tariffs and the removal of non-tariff barriers to trade, as well as a science and evidence-based approach to international trade policy and regulatory decision making.
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The International Trade and Forfaiting Association (ITFA) is the worldwide trade association for companies, financial institutions and intermediaries engaged in trade and the origination, structuring, risk mitigation and distribution of trade debt. ITFA also represents the wider trade finance syndication and secondary market for trade assets. ITFA prides itself in being the voice of the secondary market for trade finance, whilst also focusing on matters that are relevant to the whole trade finance spectrum.
ITFA presently has close to 300 members, located in over 50 different countries. These are classified under a variety of business sectors, with the most predominant being the banking industry. Others include forfaiting, insurance underwriters, law firms, fintechs as well as other institutions having a business interest in the areas of Trade Finance and Forfaiting.
To find out more about ITFA, please visit www.itfa.org or send an email on info@itfa.org
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BIMCO, the practical voice of shipping, is the world’s largest international shipping association, with around 2,000 members in more than 130 countries, representing over 60% of the world’s tonnage. Our global membership includes shipowners, operators, managers, brokers, and agents. BIMCO is a non-profit organisation.
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Founded in 1972, ANRA is the Italian Corporate Risk and Insurance Managers Association. The main goal of the Association is to promote the establishment and development of risk management knowledge in Italy and to strengthen its own reputation of privileged interlocutor as well as institutional representative for matters concerning risk management. ANRA intends to offer to its members professional update programmes and the opportunity of exchanging experiences.
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The Society of Technical Analysts (STA) www.technicalanalysts.com is one the largest not-for-profit Technical Analysis Society in the world. The STA’s main objective is to promote greater use and understanding of Technical Analysis and its role within behavioural finance as the most vital investment tool available. Joining us gains access to meetings, webinars, educational training, research and an international, professional network. Whether you are looking to boost your career or just your capabilities – the STA will be by your side equipping you with the tools and confidence to make better-informed trading and investment decisions in any asset class anywhere in the world. For more details email info@technicalanalysts.com or visit www.technicalanalysts.com
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Trade Finance Global (TFG) is the leading trade finance platform. We assist companies to access trade and receivables finance facilities through our relationships with 270+ banks, funds and alternative finance houses.
TFG’s award winning educational resources serve an audience of 160k+ monthly readers (6.2m+ impressions) in print & digital formats across 187 countries, covering insights, guides, research, magazines, podcasts, tradecasts (webinars) and video.
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HR Maritime, founded in 2008 by Richard Watts, is a Geneva based company providing services to the International Trading, Shipping and Trade Finance Industries. With a client base both within Switzerland and around the globe we offer guidance and implement tailored solutions to the range of problems besetting a company involved in the Trading, Shipping or Financing of commodities. We work with Commodity Traders, Importers and Exporters, Ship Owners and Managers, P&I Clubs, Insurance Underwriters, Trade Financiers, Lawyers and a number of associated service providers. With our broad knowledge and experience across many areas of business, geographical regions and various commodities, we are able to approach nearly any problem or situation with a practical, pragmatic and innovative solution. We are equally at home working on enhancing efficiency within the largest trading companies as with small exporters or importers looking to break into the international markets. Our services focus on Consultancy, Outsourcing and bespoke Training.
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Headquartered in Switzerland, Commodity Trading Club is the world's largest community of professionals in commodity trading, shipping, and finance, spanning the entire globe. We provide a broad spectrum of benefits, including exclusive business networking events and a cutting-edge commodity trading platform, fostering members' career and business growth.