The direction of commodity prices remains important for many emerging market countries, South Africa included. For example, our mining industry generates more revenue when commodity prices are strong, which means our government collects more income tax, improving our country’s financial health (we in South Africa so desperately need).

In the past, commodities tended to be well-correlated with one another, rising into synchronised global economic growth, and falling when things cooled.

But the tectonic market shift towards a more sustainable future means that ‘old-world’ commodities like oil and coal might face a very different set of supply/demand dynamics when compared to those used in electric vehicles or solar panels.

“Commodities are not homogeneous, and different commodities have different dynamics. We are bullish on copper, a stance that is more secular than cyclical. The reason is that electrification of automobiles will create sustained strong demand for copper. For similar reasons, the secular outlook of fossil fuels is problematic, even though the crude market is in the middle of a cyclical bull run. The different structural profile of oil from copper warrants a different long-term strategy.”

Chen Zhao, Chief Global Strategist, Alpine Macro

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