Line chart showing the rise in China’s consumption of seven key commodities: aluminum, corn, nickel, wheat, zinc, soybeans, and copper.
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, each of the four metals represented less than 5% of world consumption, but by 2017 nickel and zinc were over 40% of world consumption and aluminum and copper were over 50%.
Agricultural products saw a more moderate rise in general: Soybeans from roughly 10% to about 30% by 2019, corn from about 15% to nearly 25%, and wheat relatively flat, around 17%.
As of year-end 2021, copper was at 54%, zinc at 49%, aluminum at 62% (2020 year-end), and nickel at 54% (2020 year-end). Soybeans were at 31% as of year-end 2021, corn at 25%, and wheat at 19%.
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. Aluminum and Nickel data as of December 31, 2020. 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.
- 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.