, Columnist
Commodities Drop Looks Secular, Not Cyclical
From slower economic growth to chronic excess capacity, the long-term outlook for raw materials isn’t good.
The commodities market faces long-term challenges.
Photographer: Andrey Rudakov/Bloomberg
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Any way you measure it, the market for commodities is suffering. The Bloomberg Commodity Index of 22 key raw materials ranging from oil to copper to soybeans has dropped about 10 percent since reaching an almost three-year high in May. I’ve identified 10 forces that explain the weakness and why it will persist.
1. Slowing economic growth globally and a possible recession in the next year. Commodity producers seldom moderate supply to match weakness in demand, and commodity prices drop in recessionary climates.