Is This The Beginning Of Another Commodities Supercycle?

Commodities have seen a fairly big move this year and Richard Mills, the writer of the Ahead of the Herd newsletter, believes we are not only at the beginning stages of a new commodities supercycle but that it may even be bigger than the last one.

Here's what Rick had to say in a recent interview with FS Insider (see This One Commodity May Blow All Others Away in a New Bull Market, Says Rick Mills for audio).

A Long-Term Commodities Boom/Supercycle

The last major commodities boom or supercycle that started in the early 2000s was largely centered on China's insatiable demand for raw materials.

Millions of migrants poured into Chinese cities and the Chinese economy had rapidly transformed into a global manufacturing hub. This required an infrastructure build-out unlike anything the world had ever seen.

This time, however, it is not going to be centered on one country—it is going to be global, Mills stated.

“That's not the way this super cycle is going to work out,” Mills said. “This is going to be global. It's going to be all-encompassing. It is really going to encompass everything from energy, to food, to the metals.”

Global Drivers

There are a number of global overriding themes set to push this supercycle into high gear, Mills noted. Furthermore, these sources are set to last for decades.

First, there is a massive, global push for infrastructure investment. Everything from roads, bridges, dams, water systems, and other basic infrastructure that we all rely on every day is antiquated.

Updating and upgrading infrastructure represents trillions of dollars in investment just to catch up, let alone add the modern infrastructure that we need, such as smart grid transmission lines and 5G networks. These are all commodity-intensive undertakings.

The next factor driving this supercycle is the global effort to electrify the transportation system. This requires a massive investment in lithium ion batteries as we turn away from fossil fuel energy sources.

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Kurt Benson 3 weeks ago Member's comment

Yes, it is.