A commodities super cycle? Macro impacts of our long run views on commodities

Underinvestment in production capacity across the commodities complex alongside supportive cyclical factors will result in an appreciation of both oil and metals prices over the next couple of years, especially as the global economy picks up post-coronavirus. On a longer-term basis, our view is that commodities related to the green energy transition are set to benefit at the expense of fossil fuels. As such, most base metals are expected to enter a super cycle with copper particularly benefiting . Latin American countries are heavily exposed to commodities. Nevertheless, even with higher commodity prices, there are reasons to believe that this will not be enough to boost local economies given growing political risks, the need to tighten fiscal policy and a struggling coronavirus response. As for China, given the sheer size of the country’s economy and its diversification, the impact of a change in commodity prices is likely to be limited. That said, a commodity price change could have some impact on the country’s trade balance and the growth of certain sectors. Finally, most commodity currencies are likely to appreciate over the coming years against a backdrop of a declining dollar and current undervaluations (BTL, RUB, COP notably)