That’s No Ordinary Commodities Cycle

By Glenn Dyer | More Articles by Glenn Dyer

Australia is deep into a commodity price supercycle thanks to surging and record prices for iron ore, near record prices for copper, rises in the price of oil and LNG, as well as higher prices for key rural commodities.

More and more global media and analysts are talking about the supercycle, but thanks to the surge in iron ore prices and copper’s enormous rise so far this year, it has been gathering pace here since late in 2020, according to the monthly Commodity Price Index from the Reserve Bank.

The index is up more than 10% (in Australian dollar terms) since the start of the year.

April saw the overall index hit its highest level since November 2008 – that’s when the GFC was imploding in the wake of the collapse of Lehman brothers in September of that year. Commodity prices, led by oil in particular, as well as iron ore soared, then crashed 9though nowhere near as deep as the slump in oil prices we saw in 2020).

The RBA released the April index on Monday and said early estimates showed a rise of 3.4% in Australian dollar terms.

The Australian Bureau of Statistics said last week that the export price index rose 8.6% in the year to March with the rise in the value of the Aussie dollar depressing returns.

The bank said that the rural, non-rural and base metals sub-indices all increased in the month.

The rural sib-index hit its highest level since July, 2012 in April, non-rural commodities hit the highest since November 2008 and base metals reached the highest level since August 2007.

Over the past year, the index has increased 15.4% in Australian dollar terms.

But the Aussie dollar is up by around 20% against the greenback since April 2020 which has clipped the full impact of the price surge (which is overwhelmingly priced in US dollars).

In trade weighted index terms (which measures movements in the value of the Aussie against the currencies of our major trading partners, not just the US dollar) the Aussie was up 14% in the year to March.

Iron ore and copper prices (for instance) have more than doubled in the year to April.

The real rise in the index is more than 40% in the past year, according to the RBA.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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