Supercycle - This Time It's Different : TD This time it's different
A necessary focus on ESG, climate-change and the energy transition might prove to make this cycle unique. Demand for certain commodities, particularly those needed to foster the energy transition (the inputs in electric vehicle battery production for example) will find support, while supply of others (primarily commodities that contribute to increased greenhouse gases) becomes restricted. For example, the transition from carbon fuels to renewable fuels will hinder the supply of commodities like oil and gas, while boosting demand for others used in electric vehicles and power generation and distribution like copper and nickel.
Moreover, supply and demand balances for many commodities have started to reflect years of reduced capital expenditure and underinvestment. Demand, on the other hand, despite efficiency gains and substitution, continues to grow. It is this landscape that forms our view that we are in the early stages of a period that should see higher commodity prices and returns. Although prices are elevated in nominal terms, when adjusted for inflation, prices are still not considered expensive.