Summary of Key Points
Since 2022, the global commodities market has moved away from the previous supercycle where "all commodities rose in price" and has instead shown a K-shaped divergence: strategic metals tied to new energy and technological revolutions (such as lithium and rare earths), as well as precious metals (gold and silver), have seen significant price increases, while prices of traditional fossil fuels (crude oil), basic industrial metals (iron ore), and certain agricultural products (wheat) have fallen or remained volatile. Behind this is a fundamental change in the pricing logic—energy transition reshaping demand, geopolitical factors increasing security costs, and increased financialization. As the world's largest consumer, China needs to develop strategic responses to this new landscape.
Detailed Analysis
1. The End of the Traditional Supercycle: Why Didn't the "Universal Price Increase" Era Work?
The traditional commodities supercycles were simply periods where "all commodities rose in price for a long time." For example, after 2000, with China's industrialization, there was a massive demand for steel and oil for construction, road building, and automobile production, which drove up global commodity prices. The main reasons for this were threefold:
- A surge in total demand: The rise of emerging countries (such as China's urbanization) or post-war reconstruction led to a sharp increase in the demand for all commodities.
- The facilitation of globalization: Commodity transportation became possible on a global scale, allowing demand to be concentrated and released quickly.
- Dollar liquidity: The U.S. printed large amounts of money, which flowed into the commodity markets, driving up prices.
However, these factors have changed: demand is no longer uniformly distributed across all commodities (for instance, oil demand has peaked), globalization has encountered obstacles (with increased trade barriers), and dollar policies have become more unpredictable, leading to the end of the "universal price increase" era.
2. The K-shaped Divergence: Which Commodities Are Rising, and Which Are Falling?
Commodities Rising in Price:
- Precious Metals: Gold increased from $1,800 per ounce at the beginning of 2022 to $5,400 per ounce by early 2026 (a threefold increase), and silver rose from $23 to $115 (a fourfold increase).
- Strategic Metals: Rare earths (such as praseodymium-neodymium oxide) and lithium (lithium carbonate), which are essential for new energy and technology applications.
Commodities Falling in Price or Remaining Volatile:
- Crude Oil: Prices dropped from around $130 per barrel in 2022 to $60-$70 today.
- Iron Ore: Prices fell from $160 per ton to $90-$110.
- Wheat: Prices dropped from 750 cents per bushel to 520 cents.
In short, commodities related to future technologies (AI, new energy) are rising, while those associated with traditional industries (fossil fuels, infrastructure) are falling.
3. New Logic 1: Energy Transition + Technological Revolution, Categorizing Commodities as "Future-Focused" or "Obsolete"
The energy transition towards lower carbon emissions and the technological revolution (AI, digital economy) are redefining the value of commodities:
- Future-Focused Commodities: Electric vehicles require lithium, cobalt, and nickel for batteries; photovoltaic systems need silicon and silver for battery electrodes; AI data centers require copper for wiring and rare earths for permanent magnets. The demand for these commodities is expected to grow in the long term, driving up their prices.
- Obsolete Commodities: The demand for oil and coal is declining as countries strive to reduce carbon emissions, leading to falling prices.
For example, buying lithium mines now is like purchasing a "ticket to future technology," while buying oil is like investing in something that will likely become obsolete, resulting in different value perspectives.
4. New Logic 2: Geopolitics + Supply Chain Security: Additional Costs Driving Prices Up
The Russia-Ukraine conflict has highlighted the vulnerability of supply chains (for example, sanctions on Russian oil and gas shortages in Europe). As a result, countries are increasing "security costs":
- Export Restrictions: Indonesia has restricted nickel ore exports due to concerns about domestic demand; China is regulating the export of rare earth technologies.
- Offshore Outsourcing: The U.S. is purchasing resources from allies (e.g., lithium from Australia) to reduce dependence on rivals.
- Strategic Reserves: Both China and the U.S. are accumulating key resources like lithium and rare earths, with governments becoming major buyers, which drives up prices.
These measures have tightened the supply of strategic resources, leading people to be willing to pay more for guaranteed supplies—this additional cost, known as a "security premium," directly contributes to higher prices.
5. What Should China Do?
As the world's largest commodities buyer, China needs to adapt to this new landscape:
- Strengthen Security: Sign long-term agreements with resource-rich countries (e.g., purchasing iron ore from Brazil) and develop its own mines (e.g., searching for lithium in Africa) to ensure stable supply.
- Manage Financial Risks: Use futures markets to hedge against price fluctuations (e.g., companies buying copper futures to lock in costs) to avoid disruptions in production due to sudden price changes.
- Fight for Pricing Power: Promote the use of the RMB in commodity transactions (e.g., purchasing oil from Saudi Arabia in RMB) to reduce reliance on the dollar and influence prices based on China's own demand.
These changes indicate that the future commodities market will not be one where buying anything guarantees a profit. Instead, it will focus on the direction of future technologies and security needs—this is crucial for both businesses and individuals to understand the market dynamics.