Commodities enter super boom cycle, with few bumps in the road ahead

STOCK MARKET - Global commodity markets, especially for resource commodities, have entered a super boom cycle, with no signs of breaks anytime soon. This means that Indian industries would have to bear with high raw material prices; users should prepare to pay more even as, in some cases, the impact is felt with some lag.

Kunal Shah, head of research at Nirmal Bang Commodities, said, "Super-cycle in commodities is already under way as from last three years, (there have been) no major investments in the commodities space and global growth is getting stronger... Leading to resource boom.”

Most commodities, including base metals, iron ore, steel, coal, and naphtha, have risen by an average 30-50 per cent in the past one year, or 52 weeks, indicating a strong rally. Indian companies have received some respite because of the stronger rupee, which is almost 4.4 per cent stronger than a year ago.

Oliver Reynolds, an economist with global research house FocusEconomics, said, "The US dollar has dipped by around seven per cent since the start of the year against a broad basket of currencies, with the uncertainty regarding domestic and foreign policy that is emanating from the White House reducing investors’ appetite for the currency. As commodities are priced in dollars, this drop has likely boosted prices for raw materials by reducing the purchasing power of the greenback. However, the inverse relationship between the dollar and commodity prices is far from being a cast-iron rule; there are plenty of moments in history, such as the economic boom in the 1990s, when this link has been tenuous at best."

GET LIVE UPDATES ON MARKET