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Are We Entering A Commodity Supercycle?

Oct. 04, 2021 8:35 AM ET341 Comments


  • In the past century, there have been four great commodity supercycles with varying durations, intensities, and degrees of magnitude.
  • Each of these supercycles has been tied to very transformational periods of global economic development.
  • We go through the reasons why commodity prices are soaring today.
  • The commodity supercycle could come sooner than you expect!
  • We explain why.
  • This idea was discussed in more depth with members of my private investing community, High Dividend Opportunities. Learn More »

Global business growth
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Co-produced with “Hidden Opportunities”


A supercycle is defined as an extended period of strong demand growth that suppliers struggle to meet, resulting in a rally that could last more than a decade. In the past century, there

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This article was written by

Rida Morwa profile picture

Rida Morwa is a former investment and commercial Banker, with over 35 years of experience. He has been advising individual and institutional clients on high-yield investment strategies since 1991.

Rida Morwa leads the investing group High Dividend Opportunities where he teams up with some of Seeking Alpha's top income investing analysts. The service focuses on sustainable income through a variety of high yield investments with a targeted safe +9% yield. Features include: model portfolio with buy/sell alerts, preferred and baby bond portfolios for more conservative investors, vibrant and active chat with access to the service’s leaders, dividend and portfolio trackers, and regular market updates. The service philosophy focuses on community, education, and the belief that nobody should invest alone. Lean More.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (341)

Grinding it out in Vegas profile picture
What to buy to grab all these rare mineral miners?
ransim7222 profile picture
@Phil in OKC I love RIO, great stock.
Villi Grdovich profile picture
@Phil in OKC Something wrong at RIO. CEO a few years ago investigated for paying $4 bill for a coal deposit in Mozambique which coal cannot be transported to coast. Next CEO blew up an aboriginal sacred site and subsequently got rid of. Now RIO is in the media for continued dealing with a Chinese businessman following a case which actually put a RIO employee in jail in China. Problems with Mongolia over a mine there.

Used to be good, but has fallen over after the management was relocated to UK.
The last supercycle occured because right after the dotcom bust oil experienced lots of destruction. Plus the cost of producing oil (deep offshore oil drilling) was going up. We had this huge bust. Then came the Fed after 9/11 keeping interest rates too low for too long causing the housing bubble. So you had a smaller production base trying to keep pace with extremely overheated economy.

Now we have an economy that isn't exactly firing on all cylinders. The production base isn't really smaller they've just held back on cap-ex. Fracking allows tons of energy to be produced quickly should they go that route.

Cars and lots of other commodity based things have gotten more efficient.

Supply disruptions from a shrunk dry bulk fleet and labor shortages at first caused there to be huge shortaged in commodities. But those days are ending quickly.

I wouldn't call this a supercycle. But I do think we could see oil and commodity prices elevated for a while. First because of the money printing. and second because of the tenuous economic recovery has scared everyone enough that they do not dare expand production.

But this can change. Fracking has brought back quick cheap inexpensive production versus say Deep offshore oil drilling. So I don't expect extreme prices to last very long.
LikeaRock profile picture
@johngonole Have you seen NG prices lately?
Hazy... profile picture
@LikeaRock Vladimir + Opec+ are doing a great job at strangling Supply... Putin always said he wanted a Gas Cartel... maybe XOM and Shell are saying It's Great for the Planet??? Texas has run out of GAS... and the lights are flickering... maybe run the generator at 50Hz. That's like 20% less Speed... vs 60Hz. Maybe Europe can dial it back to 24Hz??? For fifty years the rest of Canada has poked fun at Ontario’s flickering lights.... in 1951 Power was dialed up to 60Hz... Westinghouse, which was manufacturing the generators, was holding out for 15. After a hectic debate at Niagara Falls, they compromised at 25 Hertz....

LikeaRock profile picture
@Hazy... seems tome there was plenty of Ng a couple years ago. If we put Biden in charge of the desert, within a year there would be a shortage of sand.
Fwc3030 profile picture
FREE ENERGY, but a blight on the environment with its own environmental issues. But hey, YEAH FREE ENERGY & WINDFARMS! Why don't we place some off Martha's Vineyard or San Diego?
Hazy... profile picture
@Fwc3030 75M is the longest Windmill blade that can be moved by Train... but if they design more FLEX to about 20%... 100M long... gets USA to 15 MW Windmills... You'll be able to see it for Miles and Miles. All those little red blinking lights... Blinkey. Blink, Blink... 333 feet long whoop, whoop, whoop
Fwc3030 profile picture
@Hazy... Get your humor. But I could tolerate the red blinking lights in the darkness of night when the dang things can't be seen (notwithstanding their continuing negative environmental impact) if that was my only issue. But its the downright ugliness in the daylight that offends me (not to mention the industry requires subsidies to operate profitably).
Hazy... profile picture
@Fwc3030 I'm amazed that Wind can deliver 40% capacity factor... vs Solar is maybe 20% unless its sunny year round??? But the cost per MW has fallen to $1M per MW from $6+ ??? we'll see if China suddenly finds the real cost is a lot higher... but 100 years ago... electricity was Science Fiction?
PS Would certainly appreciate your best take on Cotton investment.
Thank You
You were quite kind last year to wish me luck as I was moving heavily into Natural Gas MLP’S but warned not to concentrate to much. However at the beginning of 2021 I began to increase my concentration more specifically into gasoline SUN, PSXP and lots more EPD mainly NGL and Petrochemicals. I drastically sold off lots of Tobacco, Banks,Insurance,Drugs and more.
All good stocks but I was building for a long stagflation period and fixed assets the more fixed the better. EPD defines that, all highly profitable high cash flow companies handling must have commodities. Recent results are proving the premise Friday up 2.2%, Monday up 3.1% Tuesday up 1.2% and new cash in the next 30 days at least 2.1% more if I quickly reinvest before later EX dates.
I did diversify into some new areas for me, metals and chemicals lost my shirt and was working on my pants GOLD took my loss went to more EPD, same with most of my BASF fortunately not many shares of FSUGY but decided to hold and gradually average down, I believe China will lose on its strategy to crash iron ore by closing all steel mills.
Once again all last week I Rebalanced from my good but weaker holdings during the dip to more EPD and PSXP. Your Article on Rebalancing I now live by. I recommend specifically reading about EPD’S increased Ethylene shipping capabilities at Point Morgan.
Also Cotton will continue to rise, huge amounts will start to replace high cost Polyester in all fabrics. I would have invested last week but needed more EPD worse. So that is one super cycle commodity for sure. Thanks for your input.
Best Luck to You
jgrever621 profile picture
And there is zero chance we will have enough power generated for all the proposed electric vehicles in about 3 years. So even one solution won't be available either for some time, and be a moving target at that.
PendragonY profile picture

The electricity to charge them, the batteries to run them, and the charging stations needed to support them are all in short supply.
@jgrever621 20 million electric vehicles, 7000 miles per year = 3 nuclear power stations, sorry taken from a German political programme, very well-researched point and the one stat I took away from it.
Hazy... profile picture
@alphawiesel sadly, lots of Nukes and Coal plants are getting tossed on the Scrap Heap... even France will drastically reduce its Nuke Fleet. China has the latest European Generation... and had some Fuel issue, very recently. Taisha...


Finland has spent un-believeable amounts of money trying to build a similar plant... Hinkley Pt, UK is going thru the motions... Unit 3 is an EPR reactor and has been under construction since 2005. The start of commercial operation was originally planned for May 2009[3] but the project has been delayed and, as of August 2020, the latest estimate for start of regular production is February 2022.


USA has been building its first Nuke Plant in Decades... and it takes decades to jump thru the Hoop... after Fuk-U-shima, Japan.

Plate Tectonics has been a known problem... The Ring of Fire.


There's some Plate Tectonic Geologist that says Volcanoes in Papua New Guinea are the epi-center of the Warm - Cool water flow... James Edward Kamis blames the Ring of Fire but explains how it affects the long held belief in El Nino La Nina. His Theory is 2 Years OLDe... Volcanoes may contribute Vast amounts of CO2, Methane, Fly Ash... and shuts down European Air Travel due to 1 single Volcano in Iceland. In effect, adding to human Carbon activity and potentially dwarfing it. The Ring of Fire ultimately extends right across Antarctica and circles the Arctic. Missions to Mars only take away Dollars to study the problem... since NASA is spending some money looking at the Earth's problems. NASA dismisses the theory...



Continental Drift has moved Greenland from Iceland (highly volcanic) to its present day... but Edward Kamis says more and more Volcanoes are found every Day?



Scientists are now turning to advanced satellite imagery and supercomputing to measure the scale of natural hazards like volcanic eruptions and landslides in the Aleutians and across the Arctic surface over time. “This is absolutely the best resolution DEM data we have,” said Hannah Dietterich, a research geophysicist at the U.S. Geological Survey’s Alaska Volcano Observatory not involved in the study. “Certainly, for volcanoes in Alaska, we are excited about this.”

Once a hazardous event occurs, the “before” shots are often missing from before-and-after image sets.

Volcanic events have traditionally been measured by aerial surveys or drones, which are expensive and time-consuming methods for long-term study

lenriccio...vat of 21%....so that is just the starting point....everyone pays...no getting around that...and then based on income you pay more.....where as in the US.....different tax rates...but with tax structure...who pays 38%...31%...25%... you can hide your taxes owed through so many loop holes to reduce your taxes...especially if you own a business..[everything is a business deduction]...EU tax payers pay more in taxes per person that US
@ginklib In my opinion the average W2 worker has always paid a higher PCT tax rate than your typical business owner and they probably will for the foreseeable future.

Now a number a business owners do pay a sizable chuck of their net income in taxes. But the Dems claim that they do not. They do this to get the masses on their side to deduct more of their business earnings.

Now what happens when they raise taxes on the business owners? They just raise prices and reduce cost (labor?).

Don't hate on small business owners. Close to 70% of all new hires come through your small businesses. Take sometime to educate yourself on the net tax revenues over the past decade then look at the spending habits of our politicians. It's easy for them to spend money that's not theirs.
PendragonY profile picture

"In my opinion the average W2 worker has always paid a higher PCT tax rate than your typical business owner and they probably will for the foreseeable future."

But your opinion isn't based on actual fact.

@PendragonY I tried to use the higher rate (as a net % of taxable income) compared to the very high income earner such as your typical CEO who are provided shares of stock in leu of taxable wages. What these CEOs do is go to the banks and borrow against the shares they are give by their company. As a result they pay ZERO income taxes because they never sell the stock and loans against tangible assets are not taxable. So they pay ZERO percent in taxes. So a person in the $50,000 income bracket will likely pay some small percentage in Federal income taxes.

Take a look at the $100,000 - $200,000 and the rate a couple will pay in Federal Taxes. This group I would classify in the middle income earners bracket. On top of Federal taxes, they also pay a FICA, state and local income taxes. Now what does the highly rewarded CEO pay again? ZERO on reported paid INCOME.

So if you want to be fair and honest you find a way to collect taxes where CEOs are paid in stock and warrants.
Copper yes. But one cannot have electronics without Silver.
If these two go sideways can we say the same for the economies of the world including the US?
Luciano Vasconcellos profile picture
who are the top copper players? and lithium players?
Rida Morwa profile picture
@Luciano Vasconcellos Personally I like to use CEFs to get a wide exposure to various players and a good level of income.
Luciano Vasconcellos profile picture
@Rida Morwa thank you for taking the time to reply. Cheers from Brazil!
HaBo profile picture
@Rida Morwa Any examples?
OffSiteLocation profile picture
Well thought out. Thank you. Investors should look at the case for each commodity individually, as some still have major supply / demand imbalances, while others supply is already catching up.
Rida Morwa profile picture
@OffSiteLocation Thank you for your kind comment, due diligence is always important.
So what do you think will happen to my recent investment in Rio Tinto, whom I selected as they are entirely out of the coal market?
PendragonY profile picture

They should do well as long as iron ore demand and price remain high.
Skychris profile picture
We are probably already in a commodity supercycle..
Rida Morwa profile picture
@Skychris I would agree it is likely that we have entered into one or about to.
TraderTech profile picture
@Skychris From Rida's chart, it does appear that we're in the middle of a supercycle, that peaked in 2011? Certainly most of the commodities experienced record high prices then, such as coffee (over $3 / lb), cotton (ditto), gold and silver, etc. Yes, all have rallied off their lows of last year or so (coffee has doubled, so has cotton, hogs tripled, lumber quadrupled) - but each other supercycle has peaked and then gone into a trough, before the next cycle. Based on Rida's chart, it appears that we're heading into another trough? Am I misinterpreting his chart?
WallStPirate profile picture
UAN. Fertilizer mop big divvies and lots of upside.

Good luck to all. By the way natural gas is 37 in Europe this morning snd 34 in Asia. US is at 6 let’s hope we have a mild winter.
Rida... enjoyed reading your article. Better understanding what is ahead helps setting our investment decisions. My take away is that the underdeveloped countries will continue to develop and will require more oil and natural gas to power their autos and electrify their electrical grids. The green energy cycle has still many technical limitations with what is on the market today. With enough investment many of these barriers can be overcome but to decuple and build out a whole new infrastructure will take many decades at a great expense.

Yes new mining and drilling development has suffered because of multiple factors. Low commodity prices, environmental issues and capital investment has all contributed to the rapid increase in commodity prices.

And yes the Feds around the world have set themselves in a box surrounded by the need for low interest rates. Cheap capital and excess money supplies created by the Feds will leave us with sustained inflation for the foreseeable future. But increase inflation lessons the negative impact for previous years value of debt spending.

So from an investment perspective I see slowing net growth in the worlds economies as prices increase which in time results in net reduced employment. I my lifetime the last time we had very high inflation the Fed took on the challenge with tighten of the money supply through massive increase in interest rates. But this time the variables are different. What would happen to our national debt if cost of money went up to say 5% on 30 year paper with the fed stop buying our bonds? The same could be said not just here in the US but also in Europe and Asia. Even more draconian taxes increases? What would happen in this country if we had the same tax rates as those in Europe? Kind of scary but that might be the one of the main ways to both reduce government spending and borrowings that reduce the increase in inflation.

Love these type of inputs that helps one see the forest through the trees....
Rida Morwa profile picture
@LENRICCIO Thanks for reading and commenting, some things will be different, others will be the same. For now, we have inflation and a Fed that clearly has no interest in doing anything about it.
Oilcadaver profile picture
@LENRICCIO USA has bigger taxes than in EU.
@Oilcadaver Europe income tax hits just on savings:

19% for the first EUR 6,000 of taxable income.
21% for the following EUR 6,000 to EUR 50,000 of taxable income.
23% for the following EUR 50,000 to EUR 200,000 of taxable income
26% for any amounts over EUR 200,000

Euro withholding earnings: EURO dollars

Taxable base Tax liability Excess of taxable base Tax rate (%)
0 0 12,450 19
12,450 2,365.50 7,750 24
20,200 4,225.50 15,000 30
35,200 8,725.50 24,800 37
60,000 17,901.50 240,000 45
300,000 125,901.50 Remainder 47

Plus on top of these income taxes you pay 21% VAT on purchases.

Now take a look at the US tax table: (standard deductions are not in calculations)

10% - $0 to $19,750 of taxable income
12% - $19,751 to $80,250
22% - $80,251 to $171,050
24% - $171,051 to $326,600

32% - $326,601 to $414,700
35% - $414,701 to $622,050
37% - $622,051 or more

Anyway I slice it we pay less than in the EURO Union.

Now for the US to effectively collect more tax revenue we will need to increase the rates in the lower brackets. Now can you imagine someone earning only $35,300 pay an progressive effective tax rate between 19% - 30%. This would solve our debt and federal spending problem don't you think?
Matthias Schwarzer profile picture
great article, thank you!
Villi Grdovich profile picture
Not sure. The author says that there will be a supply gap in oil AND a copper shortage due to electric cars. I find it hard to join the dots on that one. Then inflation is caused by rising commodity prices and China not supplying cheap goods, but that can't be fought by the FED because rising interest rates will kill an overly indebted economy. So how will rising interest rate in the US stop China from developing into a high wage country?

BTW, the best commodity for price increase has been iron ore and that price has gone up in concert with massive (Capital M massive) capacity increases in the past 10 years or more (including the Chinese expansion of the Panama Canal to take super size iron ore carriers from Brazil).
Rida Morwa profile picture
@Villi Grdovich These are all independent variables that are contributing factors. Raising rates reduces inflation by reducing demand. It is the one lever the Fed has to directly impact inflation. It doesn't remove other inflationary pressures. The point is, there are numerous different inflationary pressures from different angles
Villi Grdovich profile picture
@Rida Morwa Well Ok, but is an escalation of the price of iron ore due to supply problems really inflation, or just a passing price fluctuation. A drought in the tomato growing areas makes pizza expensive, but is that inflation? Who was it that said inflation was a monetary phenomenon. have the lessons of the 1970's been wasted?
PendragonY profile picture
@Villi Grdovich

True, none of the items you listed are inflation. However, the huge amount of cash pumped out by the central banks alters the market's response to those events and produces inflation and inflation expectations.
GrahamBrecker profile picture
So sorry, author, but the commodities up-cycle has ended:-

1. Population growth has eased, worldwide, and this will continue.
2. A stronger dollar [ less Fed bond support ] will pressure commodities.
3. China appears intent on 'controlling' price pressures.
4.Co-Vid related fiscal stimulus, around the world, will abate as vaccination rates increase.
5. Economic growth will revert to longer term mundane averages.
WallStPirate profile picture
@GrahamBrecker opec is struggling to increase production. All the ammonia plant for fertilizer are closed in Europe not enough copper

China saying obtain energy st any cost. Proves oil and gas are going up.

Sorry but this is second inning of super cycle.
PendragonY profile picture

Other than the first item, all the things you list are still in the future.
crrj profile picture
Copper and Nickel for the fantasy of "renewables"-- FCX and VALE?

Iron Ore, to make all the goods consumer demand is unable to acquire? VALE?
Let The Chips Fall where they may.
Rida Morwa profile picture
@HereToWin Just make sure you have the right hand.
I am a bit iffy on this. Commodities have already had a strong run. There are some cheap names here and there but I have been burnt far too many times when the cycle TURNS (and they always do!)
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