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Commodity supercycle could spell good news for Indonesia
With prices for energy, metal and agricultural resources near record highs, some believe a new commodity supercycle is upon us as the world emerges from the pandemic. Others have doubts.
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Primary commodity: Coal is discharged from a barge at the Suralaya coal-fired power plant in Cilegon, Banten, on Sept. 22. Coal producers are currently enjoying a rise in the price of the commodity as a result of pent-up demand. (AFP/Ronald Siagian)
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rices of numerous commodities have been holding near record highs, prompting some to proclaim a new supercycle for the asset class, but others believe the soaring prices are a temporary phenomenon.
The Bloomberg Commodity Spot Index, which tracks 23 energy, metal and crop future contracts, reached a new high in October, exceeding its 2011 peak.
Meanwhile, the S&P GSCI index, a benchmark for commodity markets and measure of commodity performance, this month reached its highest point since 2014.
Largely as a result of high prices for its key export commodities, Indonesia recorded a trade surplus of US$4.74 billion in August – the largest in its history – and achieved a 17th consecutive month of surplus in September.
A supercycle is here, say some
Indonesia Commodity and Derivatives Exchange (ICDX) CEO Lamon Rutten is among those who believe the recent price hike marks the beginning of a commodity supercycle.
He told The Jakarta Post on Oct. 22 that the boom could last five to 10 years from now, prolonging the period in which Indonesia and many exporting countries stand to benefit from high commodity prices. There could always be a year or two when prices drop due to volatility, but such periods would be temporary while the trend would remain intact, he predicted.
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