Commodity supercycle ahead? Experts decode outlook for Samvat 2078

Commodities have enjoyed a brilliant rally in the year gone by, surging to multi-year highs, with crude oil at seven-year highs, steel and iron at lifetime highs, and some agri commodities hitting all-time highs.

In the energy space, Brent crude prices have surged 100 percent in the past year, according to data on TradingEconomics. Natural gas prices are up over 95 percent and gasoline prices are up over 105 percent.

The metal space has seen similar action in the past year. Aluminium prices have surged over 40 percent. Nickel futures have risen nearly 30 percent. Lithium prices have rallied over 400 percent. And Copper is up 40 percent, according to data from Investing.com and TradingEconomics.

The overall market has seen huge volatility over the past year and some experts refer to this as a commodity supercycle, a prolonged period of price highs. This action comes on the back of supply concerns, strong demand and various factors, which pushed some commodities over 100 percent higher.

Kunal Shah (Head-Commodities and Currency Research at Nirmal Bang Commodities), Ole Hansen (Head-Commodity Strategy at Saxo Bank), and Edward Morse (MD and Global Head-Commodities, Citi) decoded what the next year can look like for commodities.

Hansen believes metal prices will be supportive and probably move higher as the market moves into 2022.

“We are going through a consolidation phase. We are seeing some setbacks in most metals right now. With the COP26 ongoing, the market is clearly looking for a future where the green transformation will continue to attract a lot of interest,” said Hansen.

Shah believes the upside in the entire ferrous and non-ferrous complex seems to be very limited. “I am focusing more on the demand side that looks quite bleak in China. And I think China is heading for a slowdown. We are going to see a prolonged slowdown for the next three-six months that makes me believe both ferrous and non-ferrous metals are going to remain under pressure,” he said.

“We will see some bounce but the outlook for the next six months doesn’t seem quite bright,” he advised.

Morse has medium-term targets on metals. He is bullish on aluminium and copper. “We had aluminum do a big sell-off after it had reached USD 3500 per tonne. We think it is going to go back there when things normalise and maybe a little higher. We think copper can come below USD 10,000 per tonne and may see further sell-off but our medium-term target is USD 12,000 per tonne,” he said.