Otavio (Tavi) Costa:
This is perhaps one of the strongest cases for the long-term demand for commodities in the following years.
For the past two decades, US industrial production has remained stagnant, despite experiencing exponential growth for the preceding 80 years.
This stagnation is reflected in the fact that today’s level of production is equivalent to that of the early 2000s.
What changed since then?
China’s accession to the WTO, which led to a substantial increase in its global export share from 2% to 15%.
As deglobalization continues to gather momentum, developed economies are likely to reinvigorate their manufacturing capabilities to mitigate geopolitical risks and lessen their reliance on authoritarian countries such as China.
As a result, major economies are expected to invest heavily in the reconstruction and modernization of their industrial infrastructure, creating a strong tailwind for the already undersupplied commodity market.
Remember what China’s infrastructure spree meant to the natural resource industries in the 2000s?
This time it should be larger because it will be driven by the G7 and its allies.
The current situation presents a unique opportunity for natural resource industries to perform exceptionally well, particularly at a time when these companies remain a fraction of the overall global equity market.
This is perhaps one of the strongest cases for the long-term demand for commodities in the following years.
For the past two decades, US industrial production has remained stagnant, despite experiencing exponential growth for the preceding 80 years.
This stagnation is reflected… pic.twitter.com/aQfmOhKZWh
— Otavio (Tavi) Costa (@TaviCosta) May 16, 2023