Will Next Wave of Global Recovery Send Commodity Prices Soaring?
The next phase of the economic recovery is likely to be driven by commodity-intensive infrastructure investment, analysts have told CNBC, potentially setting the stage for further gains across the industrial space in the coming months.
China, which has been in recovery mode for months now, published data on Tuesday that showed industrial output growth accelerated to 5.6% in August when compared to a year earlier. It bolsters the view that Beijing’s demand recovery continues to gather pace, with government stimulus helping to fuel a rebound.
“We’ve already seen a metals-intensive response in China, highly metals-intensive,” Max Layton, head of EMEA commodities research at Citi, told CNBC via telephone.
“It has been absolutely stunning how strong China has rebounded on the construction side of things,” he continued, reflecting on the “spectacular” rally seen across the industrial commodity space as a result.
Layton identified “three big catalysts” for commodity investors to track through to the end of the year:
- Coronavirus vaccine news;
- the strength of China’s economic recovery; and
- the scale of the U.S. easing package.
“Ultimately, if you look at the response economies are making to (the coronavirus crisis), we’ve had the fiscal response, we’ve had central banks slashing interest rates, we’ve had central banks pumping more money into economies, the next phase is massive investment in infrastructure and that’s going to come globally,” Andy Critchlow, head of news in EMEA at S&P Global Platts, told CNBC’s “Squawk Box Europe” last month.
“We saw this back in 2008-2009 in response to the financial crisis (and) what did we get out of that? We got a rally in some of the industrial commodity markets — it was a super-cycle,” he said.
“I’m watching things like iron ore very closely now because those sorts of industrial commodities are going to skyrocket if we do get this bounce-back driven by infrastructure and then that will filter into oil.”
Reference
CNBC, 2020-09-18, “The Next Wave of the Global Recovery Could Send Commodity Prices Soaring”
