by Tyler Durden
Wednesday, Jun 23, 2021 – 02:45 AM
Some commodities have taken a beating over the last week after the Federal Reserve signaled for interest-rate increases, a rising dollar, and China’s efforts to slow inflation. The question readers should ask is what happens next?
Well, either Ark’s Cathie Wood, who has predicted a ‘serious correction’ in commodities and a return to deflation will be correct, or Ivan Glasenberg, the CEO of commodities trading giant Glencore, who told Bloomberg Tuesday on the second day of the Qatar Economic Forum 2021 that the overall rally in commodities will continue.
Only one person can be right.
Focusing on Glasenberg’s latest comments, he believes massive infrastructure spending in China, various commodities tangled in disruption due to COVID, which tighten up supplies, along with other infrastructure spending projects worldwide, including the prospects of one in the US, will continue to elevate commodity prices.
He said the Chinese have been trying to push commodity prices lower but believes that “is a short-term game because the underlying fundamentals of supply and demand will keep prices higher.”
Glasenberg said the Chinese are taking commodities from their strategic stockpile and flooding the market to push prices lower, but that can only happen for so long until they need to restock.
He was hesitant to call the post-COVID move in commodities a “supercycle,” adding that “commodity prices will stay strong for a long while longer.”
The next catalyst that moves commodity prices higher is the once-in-a-generation investment in America’s infrastructure via the Biden administration. Glasenberg said once the infrastructure package is passed, it’ll take the shovel-ready projects about 18 months to get going, adding to further demand for commodities.
Important to note a bullish yearly hammer was confirmed in 2020 on the Bloomberg Commodity Index.
He then said, “both parts of the world,” including China and the US, will be pushing infrastructure projects simultaneously.
Glasenberg questions how long will it take for new mining projects to come online to meet this new demand, warning that new mines may take longer than previous cycles.
He added that the mining industry would struggle to keep pace with the new “demand” coming from the green new economy.
One person can only be correct. It’s either Wood with her suggestion of commodity price slump or Glencore’s Glasenberg that elevated commodity prices will continue.
For Glencore’s Glasenberg full interview, fast forward to the one-hour eleven minute mark.