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Is the Commodities Bull Market Over?

Last update on: Feb 02 2017

The commodities bull market has rolled on for a while, and some former bulls now are saying the super-cycle is over. They believe commodities have a fairly fixed cycle, and this one has run its course.

Pushing back against that view, among others, is Ambrose Evans-Pritchard of the London Telegraph. You should read the whole piece, but Evans-Pritchard’s main arguments are that growth from China and the U.S. will continue. We’re in a pause, especially for China, but growth will resume. Even if it isn’t as vigorous as before, there still will be growth in the use of commodities. Another important factor is easy monetary policy around the globe.

Standing back, you might argue that commodities have held up remarkably well this year given that Europe has crashed back into double-dip slump, that the US slowed to stall-speed over the early summer, and that China itself has been through a quasi-recession with falling electricity use and rail freight, and a collapse in steel output.

For Brent crude to trade at $111 a barrel in such a bleak world suggests that Asia’s industrial revolutions have pushed oil prices to a structurally higher plateau. Energy costs may well punch higher once the next cycle of growth is under way.

No doubt the Malthusian narrative – peak this, peak that – at the top of the commodity boom four years ago was overblown. The US energy revival has shown how quickly human ingenuity can sweep away assumptions.



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