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Resuming Industrial Production Growth in America = More Demand for Commodities
Tavi Costa, one of Twitter's most prominent bulls in the commodities space, notes that long-term demand for commodities will grow as industrial production in the US grows. As we can see, industrial output in the US started stagnating in the early 2000s as China entered the World Trade Organization (WTO) and companies began offshoring their manufacturing operations to China.
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We can look back at those times and recognize that demand for commodities surged as China's economy fired on all cylinders. As G7 countries are starting to decouple from China, the amount of demand for commodities is expected to be bigger than ever before as those countries collectively will be investing more in increasing their industrial base. Collectively, they will be driving demand for energy, metals, and other resources to record levels.

The time period that the G7 is starting to consider decoupling its supply chains from China is fascinating. India is becoming a fast growing economic power. Latin America as a whole is benefiting from the growth in nearshoring. And the world is focused on extracting as much lithium, copper, cobalt, and all the rare earth metals that it can dig up to produce solar panels, batteries, and electric vehicles. Altogether, there are many trends at play that are driving commodity prices to higher levels.

Don't forget that as more people get lifted out of poverty thanks to the rebound in industrialization, demand for commodities will increase further. This is because more people are able to afford gas in their vehicles, buy more food, keep the lights on longer, and start wanting more discretionary products. All of those things are either made of commodities or are commodities themselves. Don't forget that those people will want to either move into better housing or upgrade their homes altogether and thus consume more commodities to do that.
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_A beautiful view of Doha, Qatar, photorealistic
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Where will all those commodities for our green energy facilities, for our factories, and for those households come from? They'll come from the nations that we see trapped in the resource curse. It's important to remember that as nations look to move their factories back home, they will still be dependent on other nations. Instead of being dependent on nations that produce commodities and that use the commodities to produce goods, reshoring will only give nations the power to now use commodities to produce the goods themselves. The G7 will remain dependent on the Middle East for energy, Africa for metals, and Latin America for agricultural commodities. Some G7 nations will choose to empower their own firms to produce more oil, mine more metals, grow more grains, etc. for their nation but from what I've observed, many of them would rather continue outsourcing commodities production to other nations.

In conclusion, the decoupling of supply chains from China by G7 countries is expected to drive a surge in demand for commodities. This trend, combined with factors like rising global industrialization and increased standards of living, will further boost the need for energy, metals, and other resources. Despite reshoring efforts, G7 nations will remain dependent on resource-rich regions for their commodity needs. The dynamics of global commodity markets will continue to play a pivotal role in shaping economic development and industrial growth in the foreseeable future.
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Otavio (Tavi) Costa (@TaviCosta) on X
This is perhaps one of the strongest cases for the long-term demand for commodities in the following years. For the past two decades, US industrial production has remained stagnant, despite experiencing exponential growth for the preceding 80 years. This stagnation is reflected…

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