Commodities – trade “yes”; invest “no”
Prices of industrial metals and base metals have risen rather sharply in past few months. Most prices are now ruling at multiyear high levels. Though it is not clear whether this trend continues to be driven by the “supply shock” or a “demand shock” is driving the prices of higher. Actually, it could be a mix of both the factors. For example, growth of electric mobility and accelerated adoption of reviewable (solar & wind) energy could be driving the demand of copper faster than the supply; where China’s curbs on steel production to control emission levels may have extended a supply shock to global trade. Similarly, the massive Covid stimulus by developed countries (e.g., US announcing massive stimulus for infra building) may have added to demand acceleration for steel and aluminum etc. while renewed mobility restrictions in many jurisdictions, Suez logjam, container shortages etc. may have added to supply restrictions. There are some conspiracy theories also in the works....