Deglobalisation and the Commodity Supercycle

Physical constraints in the era of realism

In The Era of New Realism, we argued that the priorities shaping state behavior have shifted decisively. Nations are subordinating cost-minimizing efficiency and multilateral cooperation to power, security, and self-reliance—driven by surging energy demand associated with the AI revolution and a more contested geopolitical environment. This evolution in state doctrine has already reshaped energy policy, defense spending, industrial strategy, and monetary behavior.

This piece extends that framework to one of the real economy’s most critical—and long-neglected—layers: commodities. In a world increasingly shaped by physical limits and strategic fragmentation, raw materials have moved beyond their traditional role as cyclical inputs or inflation hedges. They are becoming essential assets embedded in national security, industrial sovereignty, and technological leadership.

The commodity supercycle now taking shape reflects the cumulative impact of decades of offshoring, chronic underinvestment, and fragile supply chains colliding with structurally rising demand from electrification, AI infrastructure, and reindustrialisation. It is not the product of a single shock, but the logical outcome of a system that optimized for efficiency while neglecting resilience.

From efficiency to resilience: the structural demand shock

For roughly three decades, globalisation optimised relentlessly for cost. Production migrated to the lowest-cost jurisdictions, supply chains stretched across continents, inventories were minimised, and capital moved freely in pursuit of marginal efficiency gains.

This model functioned under a specific geopolitical configuration. A largely unipolar order enabled the United States to provide a security umbrella—keeping sea lanes open, deterring large-scale conflict, and stabilising trade norms—while China’s integration into the global trading system delivered low-cost manufacturing at unprecedented scale. Within this framework, long supply chains appeared safe and just-in-time logistics economically rational.

That framework has weakened.

Great-power rivalry, sanctions regimes, export controls, and retaliatory trade measures have transformed interdependence from an advantage into a vulnerability. States increasingly treat semiconductors, energy, food security, and critical minerals as strategic inputs central to sovereignty. Efficiency, once the dominant organising principle, has been displaced by resilience and control.

The fragility of the old model emerged in successive shocks. Pandemic-era lockdowns disrupted global manufacturing. The war in Ukraine weaponised energy and agricultural supply. Disruptions in key maritime routes exposed the vulnerability of global logistics networks. Each episode revealed the same structural weakness: supply chains optimised for cost collapse under geopolitical stress.

Deglobalisation, therefore, reflects a rational response to accumulated risks. And by its nature, deglobalisation is commodity-intensive.

Sovereignty and the geopolitics of inputs

In a realist framework, sovereignty is not defined by formal institutions or declarations, but by control over energy, raw materials, industrial inputs, and the capacity to mobilise them under pressure.

Over recent decades, Western economies outsourced not only manufacturing, but also processing capacity—the least visible and most strategically significant layer of commodity supply chains. This vulnerability is most evident in critical minerals. While rare earth reserves are geographically distributed, processing capacity remains highly concentrated. China controls the dominant share of global refining across rare earths, cobalt, nickel, and lithium, reflecting decades of sustained investment in capital-intensive midstream infrastructure as Western economies prioritised environmental constraints and short-term returns over strategic autonomy.

Control over processing, rather than reserves, has become the decisive variable. In many materials essential to electrification, defense systems, and advanced manufacturing, bottlenecks remain concentrated in a single jurisdiction.

In a realist world, such chokepoints translate into leverage. Export controls, licensing regimes, informal quotas, and strategic stockpiling have become instruments of competition rather than exceptional measures. Recent restrictions on gallium, germanium, antimony, rare earths, and tungsten illustrate how quickly supply chains can be weaponised and how sharply prices can respond when access is constrained.

These measures extend beyond economics. They force governments and corporations to build inventories, reroute supply chains, and secure redundant sources, amplifying demand pressures across the commodity complex. Commodities are no longer neutral goods circulating freely through markets; they are instruments of statecraft.

Western countermeasures are emerging but remain slow relative to the scale of dependence. Major powers are all pursuing similar strategies—US tariffs and domestic processing investments, EU Critical Raw Materials Act funding, India’s self-reliance initiatives—but the asymmetry persists: China’s processing dominance gives it enduring leverage in a multipolar, transactional world. This persistent gap underpins the structural character of the current commodity cycle.

Deglobalisation and the inflationary impulse

Deglobalisation does not reduce consumption. It requires more capital, more materials, and more redundancy to deliver the same level of output.

Reshoring, friend-shoring, and domestic capacity-building involve duplicated supply chains, elevated inventories, regulatory compliance, and deliberate buffers against geopolitical risk. Each layer increases the material intensity of production. Resilience carries a structural premium.

Inflation in a deglobalising world is therefore not merely cyclical or monetary. It reflects a deeper reconfiguration of the real economy. Prices must rise to allocate scarce inputs and incentivise new supply—supply that, in mining, refining, and energy infrastructure, often takes decades to develop.

Financial markets may postpone or discount this reality. Physical constraints do not.

Electrification and the industrialisation of the digital economy

The next phase of demand is electrical.

Artificial intelligence, data centres, robotics, autonomous systems, electrified transport, and modern weapons platforms are industrial systems rather than purely digital phenomena. They consume large quantities of electricity, metals, cooling capacity, and infrastructure.

Global electricity demand is accelerating not because of demographic expansion, but because of rising compute intensity. Data centre power consumption is expected to nearly double by the end of the decade. Grids must expand, transformers must be deployed, and metals such as copper, aluminium, and silver must be mined and processed at scale.

This reveals a central contradiction of the modern narrative: the digital economy rests on increasingly heavy physical foundations.

Electrification cannot proceed without metals. AI cannot scale without energy. Supply timelines cannot be compressed simply because demand is politically or technologically desirable.

The supply trap

Against this surge in demand stands a supply side weakened by decades of underinvestment.

Following the commodity boom of the early 2000s, capital expenditure declined sharply. Permitting timelines lengthened. Environmental regulation tightened. ESG frameworks raised the cost of capital and discouraged long-cycle investment. At the same time, shareholders increasingly demanded financial discipline rather than volume expansion.

The result is a structural mismatch: demand can be legislated, subsidised, and accelerated, while supply remains constrained by geology, engineering, labour, and time. Markets consistently underestimate this mismatch. They assume price signals will generate rapid supply responses. In commodities, such responses are slow, uneven, and often politically constrained.

Militarisation reinforces this dynamic. Modern warfare is material-intensive, and defence demand is politically durable and relatively price-insensitive. Labour shortages in mining and heavy industry further limit expansion capacity. Capital discipline restrains investment even when prices rise.

Together, these forces ensure that tight commodity markets persist longer than conventional cycles would suggest.

Commodities as infrastructure of power

The strongest case for commodities is not inflation protection, but physical necessity.

Uranium cannot be printed. Copper cannot be substituted at scale. Electrification depends on silver. Clean industrial processes require specialised minerals such as fluorspar.

Financial assets represent claims on future cash flows. Commodities represent the inputs without which those cash flows cannot exist.

In an era dominated by financial markets, people thought endless liquidity could overcome scarcity. In the realist era we’re entering, scarcity is once again the dominant force.

Conclusion: commodities in the realism framework

Deglobalisation, electrification, militarisation, and chronic underinvestment are not temporary disruptions. They are structural features of the emerging order.

This does not imply linear price appreciation. Commodity markets will remain volatile, cyclical, and politically influenced. Yet the underlying parameters have changed: floors are higher, adjustment mechanisms slower, and strategic value greater than in the globalised era.

In the era of realism, power flows from control over energy, materials, and production capacity. Commodities form the foundation of that system.

Ignoring them risks more than portfolio underperformance. It risks misunderstanding how power now operates in the real world.