History of commodity cycles suggests prices don’t go up forever – by Larry Berman (BNN/Bloomberg – May 10, 2021)

https://www.bnnbloomberg.ca/

The history of commodity cycles can last for years. There is likely more to go in the current boom part of the cycle. However, they have shown strong patterns of boom and bust over decades.

Sometimes it is supply shortages in the case of weather issues or disease (or current the labour shortages or under investment). In other cases, spikes in demand permanent or temporary have caused big swings.

Often, on the temporary side, it is investment demand that can be fickle. Permanent increases in demand like population growth or in the case of copper, new technologies that demand more.

The chart below is the MSCI World Metals (investable) Index (ex-precious) that includes copper, zinc, nickel, aluminum and steel company exposure. It is clear the boom cycle can last years. But the bust cycle is often quite painful.

Supply and demand come back into balance and prices normalize (with an upward inflationary bias). It is clear we are coming close to previous peaks and that likely suggests that prices should cool off soon. But there are several factors around infrastructure demand and investment that suggest the cycle can continue.

For the rest of this article: https://www.bnnbloomberg.ca/larry-berman-history-of-commodity-cycles-suggests-prices-don-t-go-up-forever-1.1601666