Goldman Sachs Underlines Prospects of a New Commodities Supercycle

SEATTLE (Scrap Monster): Goldman Sachs report foresees prospects of a new commodities supercycle to be triggered by Covid-19 pandemic.

The report titled “2021 Commodities Outlook: REVing up a structural bull market” said that it sees structural forces at play in 2020, similar to those which drove commodities in 2000. The metal prices had witnessed unprecedented surge in 2000s. The prices of copper had surged higher from $2,000 per tonne in 2000 to all-time record of $10,190 in February 2011, mainly boosted by superior demand from emerging nations, especially from China.

The industry had shared the view that the strong rebound in commodity prices in 2020 is nothing but a “V-shaped vaccine recovery”. However, Goldman Sachs sees it as just the beginning of a much longer structural bull market. The rally will be much dependent on how quickly and smoothly the world will recover from the pandemic.

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The policy focus surrounding green industrial revolution will likely result in creation of capex cycle on par with the supercycle witnessed in 2000s. This will have direct impact on demand for metals such as copper. It foresees lack of supply to meet structural shift in demand, which in turn will push commodity prices higher.

Goldman Sachs predicts a 12-month target of $9,500 per tonne for copper. Overall, commodities are likely to return 30% in 2021.