Following my earlier notes on copper demand and AI-driven electricity growth: https://substack.com/@meanmatch/note/c-173051895, on “Copper, Carbon, and the Material Limits of the Energy Transition“: https://meanmatch.beehiiv.com/p/copper-carbon-and-the-material-limits-of-the-energy-transition and on commodities on the verge of a new supercycle: https://meanmatch.beehiiv.com/p/commodities-on-the-verge-of-a-new-supercycle
The China Factor in the Emerging Commodity Supercycle As global commodity markets teeter on the edge of a transformative supercycle, recent developments underscore a pivotal wildcard: Chinas economic trajectory. In my previous analysis, I highlighted the structural underinvestment, supply constraints, and geopolitical tensions priming commodities for a multi-decade upswing. Yet, an often-overlooked dynamic amplifies this potential - the decoupling and potential recoupling of Chinas growth with global resource demand.
Since the pandemic, Chinas influence on commodity prices has waned significantly. The drivers of demand have shifted away from traditional engines like Total Social Financing (TSF) pulses, which once fueled massive infrastructure and urbanization booms. Instead, U.S. fiscal policy has taken the reins, sustaining consumption and investment in the worlds largest economy amid its own expansionary measures. This pivot has kept commodity markets in a holding pattern, with prices reflecting American-led growth rather than broader global synchronization. However, imagine the ripple effects if China merely stabilizes its economy - placing a floor under growth without aggressive expansion. Even modest signs of life from Beijing could reignite demand for industrial metals, energy and other resources, layering atop existing U.S. momentum. Non-U.S. economies, including emerging markets, could follow suit, creating a multiplicative effect. The result? A surge in commodity prices that outpaces current expectations, potentially accelerating the supercycles onset.
This scenario is not hypothetical; its rooted in Beijings current restraint. Chinas austere policies have inadvertently benefited the global economy, particularly the United States, by capping commodity inflation and easing pressure on consumer prices. Without this self-imposed discipline, amid property sector woes and export-focused shifts, global supply chains would face even tighter squeezes. Indeed, a large-scale stimulus from China could unleash a powerful economic surge, propelling resource prices skyward. This would not only inflame U.S. household costs but also disrupt Treasury markets by stoking persistent inflation, forcing central banks into a tighter bind.
Consider the historical interplay between Chinas urban fixed asset investment in real estate and industrial metals performance. Data from 2010 to 2025 reveals a once-tight correlation that fractured post-pandemic, with metals annual percentage changes decoupling from Chinas real estate slowdown. This divergence highlights how U.S.-centric drivers have filled the void, but a reversal, even partial, could realign these forces explosively.
Shifts in currency dynamics add another layer. The growing use of CNY-denominated commodity trades alters inflations escape valve, redirecting pressures from USD-priced resources toward assets like gold, which has already risen over threefold relative to broad commodity indices since early 2022. This de-dollarization trend, subtle yet profound, positions gold and select metals as barometers of geopolitical realignment, further entrenching commodities as strategic hedges.
Critics argue that Chinas pivot to industrial production and exports may not fully revive commodity-intensive sectors like real estate or that internal challenges limit its capacity for bold stimulus. Yet, even incremental stabilization, bolstered by infrastructure offsets or consumer incentives, could tip the scales. Property remains a commodity powerhouse, but manufacturing surges have partially mitigated slumps, sustaining demand for copper, iron ore and rare earths.
