Commodity Price Impact on Industrial Sector Growth
A recent study on commodity pricing conducted by MAPI and RBC found that for most of the last 15 years, demand for industrial products was significantly elevated by a commodity super-cycle, driven by unprecedented demand from China. As China slowed, the commodity bubble burst and demand dissipated for industrial products, even those without a direct connection to the extraction and refinement of commodities. Today’s weak industrial environment is a “hangover” from the burst commodity bubble, with few positive catalysts to get things moving again. Yet public valuations for most industrial companies are near all-time highs. Without a robust rebound in industrial end markets, these valuations can't be sustained and a potentially unprecedented wave of consolidation could ensue, forcing companies to decide on which side of the consolidation divide they will be.