It is pretty safe to say that the commodity supercycle is
dead? From your perspective, what was the reason or reasons for its end?
Nouriel Roubini : Well, I don’t think there is one
reason. I would at least separate between four categories of
commodities; each one of them has a different dimension of demand and
supply. One is oil and energy; the second would be precious metals. The
third one will be industrial and base metals, and the fourth will be
soft commodities and agriculture.
There are several factors that imply
the corrections. One is that China now has had a very sharp slowdown.
Even other, well-advanced economies are growing weakly now. There is
also the weakening of growth in many other emerging markets that is
going to bear down on global growth and on various commodity prices.
Secondly, in the oil and energy
sector, the shale gas and oil revolution implies a significant increase
in supply. There’s lots of shale gas and oil, but of course also
discoveries offshore and in oil fields from Brazil to Colombia to the
oil that’s been discovered in Sub-Saharan Africa, from Sudan all the way
down to Mozambique. The supply of oil and energy is going to rise. And
demand is slowing down because China’s growth is slowing down, and you
also have a variety of measures taken by many countries to save on
energy and become more energy efficient.
The other thing is that when commodity
prices were high, investments were made to increase supply, whether it
was in energy or base metals or agriculture or you name it. All the new
supply is coming to the market. So now the supply curve has become more
elastic, and therefore the increase in supply for any given demand curve
is pushing prices down lower. This is a bit of a delayed cycle, and
it’s a combination of many different stories—the China story, the
energy-saving story, the shale gas and oil revolution, the delayed
increase in supply coming from previous high prices and so on. It’s not
just one story. - in indexuniverse
