#3. An Existential Commodity Supercycle as Competition for Commodities Increases

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#3. An Existential Commodity Supercycle as Competition for Commodities Increases

Wars (hot, cold or economic) are commodity-intensive, inflationary and capital-intensive. The West will spend trillions of dollars over the next decade or so to restock, build and secure commodity supplies to 1) rearm their militaries to preserve and defend the current world order; 2) ensure industrial security by reshoring supply chains and production after decades of off-shoring; and 3) build out the infrastructure for the energy transition to cleaner forms. This immediate demand shock from these three broad themes will be highly commodity and capital-intensive but interest-rate-insensitive (inflationary).

This sudden and massive demand shock is colliding with a woefully inadequate supply situation due to a decade of underinvestment, sanctions on Russia (the world's largest producer of most commodities) and rising resource nationalism spurred by geopolitical tensions. The level of capital intensity necessary will also mean increased long-term debt (both government and private), even higher than today's already steep levels. The commodity supercycles of the past featured supply shocks (1970s OPEC embargo) and demand shocks (2000s China). This upcoming commodity supercycle has elements of both supply shock (chronic supply shortages, sanctioned Russian supply) and demand shock (energy transition, reshoring, rearming, etc.). The global competition to secure commodities is increasing.

Part B. Growing Demand for Energy Transition Materials

Before the Russia-Ukraine war, the demand for energy transition metals and materials was already a long-term secular demand story. The Russia-Ukraine war, rapid de-globalization and developments in the global oil markets have moved the energy transition metals to an immediate demand shock. There are many metals and materials required for the energy transition to occur; this note will focus on uranium (generation), copper (transmission) and lithium (storage).


Energy Transition will have extra demand for silver, copper, zinc and rare earth minerals for at least 20 years.

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