Line chart shows the rise in China’s consumption of industrial and agricultural commodities.
Y-axis: Chinese consumption as % of world consumption; X-axis: 1980-2021.
The rise in Chinese consumption of metals has significantly outpaced the rise in agricultural products.
In 1980, Chinese consumption represented less than 14% of world consumption of agricultural products. By 2021, that figure had risen gradually to nearly 24%.
In 1980, Chinese consumption of industrial metals represented less than 4% of world consumption. That figure rose gradually to just over 19% by the end of 2003, then more steeply to more than 59% by the end of 2021.
Sources: Bloomberg, U.S. Department of Agriculture, World Bureau of Metal Statistics, and Wells Fargo Investment Institute. Annual data from January 1, 1980 to December 31, 2021. Agricultural commodities represented are corn, soybeans, and wheat. Industrial metals represented are copper, zinc, nickel, and aluminum. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investing in commodities is not appropriate for all investors. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility.
Super cycle = If you look at commodity prices over the very long term (hundreds of years), it becomes evident that they tend to move in overall bull and bear cycles, some lasting decades. These are super cycles.
Key Takeaways
- China has become the world’s largest commodity consumer, accounting for roughly half of the world’s demand for industrial metals.
- We believe commodity investors should keep an eye on China. If China’s economy falters, we could see a pause in the commodity bull super cycle.