Commodity Watch: The Resource Prices Reshaping Markets

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" src="/getContentAsset/061c994a-a452-418f-bfa0-f2cf3cf5c577/cb87803a-320c-480f-ab75-7b9029eaaf79/Ahmad-Al-Sati-new.png?language=en" alt="Ahmad Al Sati - insights" title="Ahmad Al Sati - insights" style="width: 180px" class="fr-fic fr-dii"></div><span style="font-size: 12px"><div class="col"><strong>AHMAD AL-SATI<br></strong>PORTFOLIO MANAGER<br><br><p>Ahmad is the President and Portfolio Manager for Gemcorp Capital Advisors LLC, based in New York.&nbsp;<br><br>Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser.&nbsp;</p></div></span></div><hr><p>In the last five years, several commodities have seen their prices outpace the overall Bloomberg Commodities Index (BCOM). Uranium outpaced BCOM by approximately 150%, Coffee by 120%, Silver by 105% and Gold by 98%. These price increases have been driven by bottlenecks and shifting supply patterns. Such as Europe weaning itself off Russian natural gas (seeking alternative supplies), volatile weather patterns impacting coffee prices, increased global financial decoupling driving gold prices higher, worsening ore grades in industrial metals such as copper and a general dearth of new supplies for others like silver.</p><p>These commodities are not the only ones. In December, the Henry Hub price for natural gas reached a three-year high driven by increased exports of Liquid Natural Gas (LNG) and colder weather. International prices are higher than US prices, encouraging exports and turning the US into the largest LNG exporter, as around 56% of Europe’s LNG imports now come from the US. That competition also increased US prices. Domestic underinvestment in the US further aggravated pricing. Boston’s natural gas price, for example, is high because the US can’t pump gas to where it is most needed (building the pipe infrastructure will take time). Price increases are not confined to natural gas either. UBS is projecting that copper prices will reach $13 thousand per metric ton in 2026, up from approximately $11.6 thousand per metric ton today even as it rallied near 20% in 2025. Price increases may be driven by a lack of new supplies, especially as the demand for copper is expected to increase around 25% by 2030.</p><p>A prolonged cycle of higher commodity prices will change things. Higher natural gas prices mean higher electricity prices for consumers, with approximately 40% of electricity production in the US from natural gas, and businesses with prices to the US industrial sectors expected to increase by around 21%. These increases are inflationary. They will also make manufactured goods more expensive and negatively impact margins and working capital cycles. That means higher interest rates, to combat persistent inflation. It also means more demand for capital as businesses attempt to manage higher costs.&nbsp;</p><p>Globally, it means a shift of regional outperformance from commodity importers to commodity exporters. Over the last decade, Europe and parts of Asia have benefitted from lower commodity prices as they used low-cost inputs to build manufacturing hubs. At the same time, Latin America and parts of Africa have suffered from the lower commodity prices. The accompanying economic story in each region has been telling. If input prices become more expensive, exporters will benefit. Importers will not. In turn, we could see an accompanying outperformance of equity markets, currencies and businesses in the exporting countries in a way we have not seen since the early 2000s. That would have profound impacts on investment strategies as inflation hedges and volatility hedges become more important (commodity cycles typically have 3-5 significant drawdowns and fragile supply chains may mean more volatility in the price of the underlying inputs) and regional exposures change in material ways. A regime change might be upon us. Managing that change over the next decade will be key for both business and portfolios.</p>