By Carl Jones
Interactive Investor
The commodities supercycle of 2000-2008, which produced roughly 20% compound annual returns, was driven by scarcity of supply to meet the demands of emerging nations — notably China.
Investment in the mining and extraction industries has now caught up with demand, ironically at a time when the latter is levelling out.
Western markets such as the US and UK are recovering, but they are less commodity-intensive than emerging markets, where the construction of infrastructure has been fast and furious. As a result, prices of base metals such as copper and aluminium have moved sharply lower this year since China’s growth stumbled, and only oil, which is primarily influenced by the geopolitical backdrop, has risen.