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The latest rally in many commodity prices has prompted some commentators to herald the arrival of a new commodity supercycle but history suggests that prices will fall back as stimulus is withdrawn. In the view of strategists at Capital Economics, a prolonged surge in metals prices is likely as efforts to decarbonise the world economy take effect, but they are sceptical that it is already underway.

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“We do not think we are at the beginning of a new commodity price supercycle. The latest rally in commodity prices is reminiscent of 2009-10 in that it has been fuelled by strong Chinese demand. We expect that this is likely to run out of steam later this year, as stimulus is withdrawn, and that prices will fall back.”

“We do see a more sustained pick-up in industrial metals demand and prices starting later this decade as green economy initiatives gain critical mass. But given that such initiatives will have long-run negative implications for oil and agricultural commodities’ demand, we don’t think a commodities-wide supercycle is on the cards.”