Since the beginning of this year, there has been a broad-based spike in the prices of several commodities, including energy products (crude oil, natural gas), industrial metals (copper, aluminium), and agricultural goods (palm oil, cotton, sugar). For example, Brent crude has moved from below $70 a barrel to over $100 a barrel. Copper has escalated from $13,200 a tonne to $14,300/t. Aluminium is up from $2,700/t to the current $3,500/t. Crude palm oil has spiked from $1,000/t to $1,300/t. Sugar and cotton are no exception.

Temporary Rally Or Super-Cycle?

Many ask if this is the start of another commodity super-cycle. In reality, the current price rise is nothing but a temporary rally caused mainly by geopolitical events centred around the Persian Gulf region that has caused supply chain disruptions of critical energy commodities like crude oil and natural gas. The US-led trade tariffs and El Nino weather phenomenon have exacerbated the situation.

Current high prices contain a risk premium of 10%-15%. Speculative funds have created huge trading positions in the derivatives market. When the threat of military action decisively ends and cargo movement normalises, funds will quickly exit their long positions and risk premium will reduce substantially. There will be a price correction.

A genuine commodity super-cycle has certain distinct features—it would be a multi-decadal phenomenon; it would involve a........

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