Goldman Sachs predicts dawn of a post-COVID-19 commodities supercycle

The 2020s will usher in a new commodities supercycle akin to the boom of the early 2000s, according to investment banking giant Goldman Sachs.

Goldman’s view on the imminent supercyle is predicated on how the world will recover from the COVID-19 crisis, with emphasis on policies supporting a green industrial revolution.

The world’s two largest economies – China and the US – will lead the global effort to decarbonise key industries, after China recently committed to carbon neutrality by 2060 and US president-elect Joe Biden pledged to deliver a US$2 trillion green infrastructure programme.

This green industrial revolution ‘has the potential to create a capex cycle on par with the emerging markets-driven cycle of the 2000s’, according to Goldman.

The impact of a globally synchronised decarbonisation push on demand for energy metals such as copper, lithium and nickel would be dramatic. Goldman is particularly bullish on copper, with a 12-month target of $9,500 per tonne.

But copper is only one part of a wider call for a 30% return on commodities this year, which is rooted in Goldman’s belief that there will be a lack of supply for key metals to meet any structural shift in demand.

While a strong rebound across several commodities last year might be viewed as a ‘V-shaped vaccine recovery’, the bank asserts it is just ‘the beginning of a much longer structural bull market for commodities’.