What is a super cycle?

You may have heard the phrase ‘super cycle’ in relation to commodity markets, but be unsure exactly what it means. Essentially a super cycle is a long period of strong demand growth that suppliers are unable to match. This results in long up trends in commodity markets that can last for years.

When was the last one?

The last super cycle was when China joined the World Trade Organisation in 2001 removing barriers to commerce. Others that economists identify are the industrialization of the U.S in the early 1900’s, the global rearmament accompanying the rise of Nazi Germany in the 1930s and the rebuilding of Europe and Japan post World War II.

What might trigger this one?

The large planned stimulus package from the US and planned infrastructure spending could trigger one. Combine this with the move of Governments to switch to renewable sources and the shift to electric vehicles then the demand is set for copper, lithium, cobalt, nickel, and graphite.

The takeaway

Copper is a key commodity used in both construction and green technology. The recent gains could continue, so look out for places to manage risk with buyers on pullbacks and breakouts expected as long as this environment remains.