The supply and demand disruptions resulting from COVID amplified commodity price signals, first down then up. This dynamic has amplified the noise level, thereby lowering the information value of prices. With a resumption of price volatility underway, it is a good time to step back and observe the fundamental and structural economic shifts that are underway. The key question for investors, which commodity opportunities are shorter cycle and which are longer cycle?
At the moment, the energy transition stands as the primary secular driver for commodities. There is no doubt in my mind that the world is on the brink of this transition at scale. As a result, there is likely to be a longer than normal upcycle for certain commodities, which could last into the next decade. Meaning, while commodities are and will remain volatile, there should be a structural uplift for the energy transition beneficiaries.
Continue reading this report with a stoxdox membership.