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As Material Prices Rise, Economists Say There May Be A New Supercycle Ahead

AUDIE CORNISH, HOST:

States start to reopen. The economy is picking up, too. One result - the prices of commodities are rising fast. Bryant Urstadt from our Planet Money podcast asked, are we going into a so-called supercycle that could drive up prices for everything?

BRYANT URSTADT, BYLINE: Chad Palmer of Olathe, Kan., works in construction, and his weekend hobby is sorting and reselling scrap metal. I talked to him one weekend as he was banging around in his garage.

CHAD PALMER: It's kind of my me-time of the week, typically.

URSTADT: I like that sorting metal as your you-time.

PALMER: It really is, yeah.

URSTADT: He makes art with some of it, and the rest he takes to a yard called City Scrap in Lee's Summit, Mo. And lately he started to notice something - the price of scrap metal is going way up.

PALMER: And I think in the last year, I've seen about double what I used to get.

URSTADT: That's a big change.

PALMER: Yeah, and it's - yeah, it sure makes it a lot more worthwhile.

URSTADT: So why are the prices of scrap metal on such a tear? After all, it is still a pandemic, and we are still climbing out of an economic slump. To find out, I got in touch with Joe Pickard.

JOE PICKARD: Chief economist and director of commodities at the Institute of Scrap Recycling Industries.

URSTADT: Pickard laid out a few reasons metals' prices are high. For one thing, factories are opening back up, using more steel and other metals.

PICKARD: Manufacturing has been, actually, a bright spot.

URSTADT: There are also still tariffs on steel left over from the Trump administration.

PICKARD: Tariffs have had a big impact.

URSTADT: Also, shipping containers are in short supply, as are train slots and even truck drivers.

PICKARD: Transportation has kind of been a nightmare across the board.

URSTADT: And it's not just prices in metals that are rising; it's everything from soybeans to lumber to gas to, most importantly, oil, which is always a major part of the commodities market. And all of these things determine the cost of many of the things we consume, which has some economists asking if we might be entering what is called a commodities supercycle. Now, prices always cycle up and down, but in a supercycle, they go up to records and stay up for years, even decades.

There have been just a few supercycles like that - in the 19th century during the industrial revolution, in the 1950s when Europe and Japan rebuilt after World War II and in the late '90s and early 2000s when China started to industrialize. I asked Pickard about all of this.

I've been reading a term - commodities supercycle. Is that - do you use that term? Do you feel...

PICKARD: (Laughter).

URSTADT: What do you think of that?

PICKARD: I would say that the prices that we're seeing today are at supercycle levels. But I think as soon as analysts started saying that publicly, we did start to see prices fall back a little bit.

URSTADT: OK. Pickard isn't ready to declare us in a supercycle, and a lot of other economists are holding off, too. That's because supercycles so often include huge populations industrializing, almost from scratch. Still, it is true that the U.S. is planning a major industrial upgrade of its own.

PICKARD: There's an expectation that the administration is going to be able to pass an infrastructure bill this year, which would include a lot of investment spending, and so that's boosted expectations.

URSTADT: And there are also plans for a new green economy. A whole fleet of electric cars and acres of windmills would drive up demand for all kinds of metals. Although that does sound like a supercycle, maybe not. It would also drive down demand for one of the biggest commodities in the world - oil.

Bryant Urstadt, NPR News.

(SOUNDBITE OF SOUND NOMADEN AND MSP'S "SNOWFLAKE") Transcript provided by NPR, Copyright NPR.