Commodities In Super Cycle
Source : Indian Express
GS II : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

Why in News?

The board rise in global commodity prices is leading to input cost pressures. There is a growing concern as it is expected to have a bearing on cost of infrastructure development in India

• It have an impact on the overall inflation, economic recovery and policy making.
• This inflation that is leading to jump in prices and it is not demand driven.

Key Facts

Commodity super cycles are decade long periods in which commodities trade above their long-term price trend.

• Commodity super cycle resulting from recovery in global demand (led by recovery in China and the US), supply-side constraints and loose monetary policy of global central banks, most commodities are on an unprecedented bull run that is expected to extend.
• A commodity super cycle is a sustained period of abnormally strong demand growth that producers struggle to match, sparking an increase in prices that can last years or in some cases a decade or more.
• Commodity super cycles for Various commodity
  • Steel, the most commonly used input in construction sector and industries, is at all-time highs.
  • Sugar, corn, coffee, soy bean oil, palm oil have risen sharply in the US commodities market.
  • Metals including gold and silver are also on an upward trajectory.
  • Prices of copper are also at all-time highs, surpassing the previous peak.
  • Brent crude oil prices are also on a tear, nearing around $69 to a barrel with any potential rise above $72.
• Possible Reason
  • As a result of recovery in big economies like China and the US.
  • Money is diverted for asset making as a fear of Inflation.
• How does this Impact India ?
  • India having infrastructure development plan, Sandhu also feels that the sharp rise in prices of steel and cement is a bit of a worry.
  • Higher metal prices will lead to higher WPI inflation and so the core inflation may not come down.

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