Silver, Copper, Palladium and other industrial metals are off to an impressive start in Q2, 2021, driven by a big surge in Green Energy and Infrastructure spending this year.
There are plenty of reasons why commodities are on the move, but the predominant driver is a vaccine-led recovery fuelled by massive amounts of global stimulus into green energy and infrastructure projects. This is against a backdrop of tightening supply across many key commodities following years of under investment. These developments increasingly drive expectations that we have entered a new dawn for commodities, confirming the prospect for a new supercycle.
A supercycle is a long-term period where commodities trade well above they’re typically trend. This upwelling in commodity prices can have effects on other economic indicators, such as inflation. The last supercycle occurred in the early 2000s – when countries such as India and China began investing billions of dollars into mega infrastructure projects, which required an abundance of industrial metals. This sent commodity prices to record highs.
Now in 2021, its America’s turn to step up with President Biden’s Build Back Better Plan to transform the U.S. economy.
Similar to the $1.9 trillion stimulus plan signed only a few weeks ago – Biden’s new package will involve pumping hundreds of billions of dollars into improving the nation’s aging roads, bridges, schools, railways, waterways, airports and cellular network.
One of the highlights was $174 billion investment into Electric Vehicles and billions more for renewable energy initiatives – with the goal to build a national network of 500,000 electrical vehicle charging stations by 2030.
Biden’s massive Green Energy and Infrastructure spending plan, ultimately means that the U.S is going to need more commodities.
Specifically industrial metals and lots of them including: Copper, Palladium, Platinum, Silver, Lithium, Nickel and rare earth metals for batteries and 5G technology.
However, supply is limited – which is yet another indication that we could be on verge of a new supercycle in commodities as demand outstrips supply this year.