{"id":116091,"date":"2023-10-21T09:52:27","date_gmt":"2023-10-21T09:52:27","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=definition&p=116091"},"modified":"2023-10-22T11:12:58","modified_gmt":"2023-10-22T11:12:58","slug":"commodity-supercycle","status":"publish","type":"definition","link":"https:\/\/www.techopedia.com\/definition\/commodity-supercycle","title":{"rendered":"Commodity Supercycle"},"content":{"rendered":"

What is a Commodity Supercycle?<\/span><\/h2>\n

A commodity<\/a> supercycle refers to a prolonged period of time when commodity prices stay considerably above or below their long-term trend. Usually, however, prices stay higher.<\/p>\n

During this time, prices of several commodities, such as industrial metals, energy, and agricultural products like wheat, soar. Strong economic growth and higher demand<\/a> for primary goods are some of the main drivers. Increased urbanization and globalization, especially in recent years, also support commodity supercycles.<\/p>\n

How Long Does a Commodity Supercycle Last?<\/span><\/h2>\n

The exact number of years that mark the definition of a supercycle vary. Some experts consider commodity supercycles to be about 10-15 years or even more. Others are happy to consider shorter ones, such as the 2000-2008 one caused by China’s increased industrialization.<\/p>\n

In general, they can be anywhere from shorter 6-8-year cycles to over a decade or several decades. Grand supercycles take this a step further, with periods of 50-60 years at a time.<\/p>\n

The reason it can be tricky to establish exact timeframes for commodity supercycles is that it depends greatly on the points of the cycle people consider for measurement.<\/p>\n

Supercycles are phenomena that can take several years to become apparent. Then, they take many more years to play out and finally cool down. Hence, it may not be immediately clear when one has started or ended, thus leading to variations in length calculations.<\/p>\n

This also depends greatly on the methods used to identify them. One of these is the asymmetric Christiano and Fitzgerald band-pass filter method, as used by the Bank of Canada.<\/p>\n

How Do Commodity Supercycles Work?<\/span><\/h2>\n

Commodity markets are, in nature, quite cyclical. This is due to the long time it usually takes to develop new resources, like mines and oil fields. These can take several years and often even a decade to be fully functional.<\/p>\n

Therefore, even if producers take immediate measures to increase production, such as opening a new mine, it can easily take years for it to translate into actual supply.<\/p>\n

The primary cause of a supercycle is robust economic growth and increased globalization, such as during the Industrial Revolution. This leads to more demand for several commodities, such as metals, energy, and agricultural products, to support this growth.<\/p>\n

Commodities Often Impacted by Supercycles:<\/p>\n

\"Commodities<\/p>\n