According Macquarie Research, which released a 112 page commodities outlook report recently, the supercycle in commodities, is now on hold until global growth reaccelerates. Noting that it is declaring force majeure on the supercycle, the Macquarie team explained that its views were based on the belief that economic growth and therefore metals demand growth will be picking up in late 2009 or early 2010.
The only positive Macquarie sees is that metals producers have reacted quickly to the collapse in demand and production cuts are coming through thick and fast. This is not eliminating the surplus threat, according to Macquarie, but is at least preventing the surpluses from being much, much worse. In the short term, Macquarie notes it's difficult to be positive about any metal, and all bulk commodities are facing significant falls in contract pricing in 2009.
Macquarie noted that steel is facing a massive demand collapse but prices are being supported by massive production cuts, which should help protect margins, with raw material costs falling also. The base metals, which are already priced on a spot basis have reacted rapidly to the changing demand situation and it could be argued that they are already factoring in large surpluses arriving in late 2008 and through 2009.
Beyond 2009, Macquarie likes copper, steel and coking coal among the commodities that should see some demand recovery in 2010. It said that "Commodities that are very dependent on smaller, less well financed companies are likely to lose a lot of planned supply growth due to the credit crisis, zinc and molybdenum stand out."
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