Edward Morse, Global Head of Commodities Research at Citi Group, in an interview with CNBC-TV18, on Thursday said he sees a boom time for commodities.

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“Definitely a boom time for commodities,” said Morse. “It is misleading to call it a supercycle or anything in between a boom and a supercycle,” he added.

“You cannot have a supercycle in commodities without there being a participation of the energy sector in that supercycle. The reason for supercycle is essentially that all commodities are energy intensive and energy commodities are the most liquid, the most heavily traded of all commodities."

"So you need the energy sector to have a supercycle for the rest of the commodity sector to have a supercycle but the rest of the commodity sector – the whole commodity sector cannot have one unless energy partakes in that,” said Morse.

“Metals are in demand in terms of the energy transition. Metals are a critical element in moving towards battery power and copper and aluminum in particular are critical to the grid build-out. So there is no doubt in our mind that the energy transition is fairly metals intensive.”

Morse thinks there is a temporary bubble in iron ore prices. “The costs of iron ore are fairly low given where the price of iron ore is today. The marginal price of iron ore is USD 28-25 a tonne and the average cost of mining iron ore are around $80 a tonne. So getting to USD 120-140 a tonne was never going to be sustainable,” he said.

For gold, he said, “We think this is going to settle between $1,700 per ounce and $1,800 per ounce range where it has been trading recently. It may go down a bit. We believe that central banks particularly in emerging markets (EMs) are going to be increasing their gold holdings just as they were increasing them over the course of the ten years before the pandemic made them a little bit too expensive for EMs central banks.”

For full interview, watch the video…

(Edited by : Bivekananda Biswas)

First Published:Mar 4, 2021 4:10 PM IST