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Global Category Intelligence

Q2 2025

POV: The Supercycle and Impact on Commodities

In a 14 August 2024 report, Goldman Sachs reported that “Saudi Arabia is expected to invest $1 trillion across six strategic sectors by 2030,” with nearly three-quarters of the funds fueling non-oil sectors such as clean energy, metals and minerals, transport and logistics, and digitalization. The investment firm calls this part of a growing CAPEX “supercycle.”

What is a CAPEX Supercycle?

A "CAPEX supercycle" refers to a sustained period of elevated capital expenditures (CAPEX) across various industries. While the term has gained prominence recently, the phenomenon is not entirely new.

There have been several CAPEX “supercycles” in the past. For example, post-World War II witnessed a surge in capital expenditures fueled by reconstruction and technological advancements. The 1970s oil crisis spurred investments in energy infrastructure, while the late 1990s and early 2000s digital revolution drove tech-focused capex.

Several key trends underpin today's potential CAPEX supercycle. Digital transformation, marked by investments in cloud computing, AI, and automation, is a primary driver. The global shift towards renewable energy sources is also fueling significant capital expenditures. Additionally, supply chain disruptions have prompted businesses to invest in resilience, while government infrastructure spending creates opportunities for private sector investment.

What Does It Mean for Indirect Commodities?

The CAPEX supercycle represents both a challenge and an opportunity for the global indirect commodities market. If trends continue, there will likely be five significant impacts on indirect spend:

Increased Demand for Indirect Commodities

MRO (Maintenance, Repair, and Operations): As companies expand and upgrade their facilities, the demand for MRO supplies will rise. This includes everything from industrial machinery parts to safety equipment, leading to tighter supply chains and potential price increases.
Energy: The shift towards renewable energy sources, a key component of the CAPEX supercycle, will drive up demand for energy-related commodities like solar panels, wind turbines, and associated materials. The increased energy consumption during construction and operation will also stress energy supply chains.
Logistics: The transportation of materials and equipment for large-scale projects will create a surge in demand for logistics services, potentially leading to bottlenecks in supply chains and increased shipping costs.

Price Volatility and Supply Chain Disruptions

Commodity Price Fluctuations: The surge in demand for raw materials like steel, copper, and aluminum due to massive infrastructure projects can lead to price volatility. This will directly impact the procurement of commodities that rely on these materials.
Supply Chain Strain: With the ramp-up in CAPEX spending, global supply chains, already stretched by recent events like the COVID-19 pandemic and geopolitical tensions, may face further disruptions. Delays in delivering key materials or components could ripple to the commodities market.

Focus on Sustainability

Green Procurement: As part of the supercycle, investments in green technologies and sustainable infrastructure will require procurement to focus on sourcing environmentally friendly materials and services. Indirect commodities like sustainable packaging, eco-friendly lubricants, and energy-efficient machinery will increase demand.
Compliance and ESG (Environmental, Social, and Governance): Companies must adhere to stricter environmental regulations and ESG standards, which will influence procurement strategies. This may lead to prioritizing suppliers that align with sustainability goals, potentially increasing costs and driving supply chain innovation.

Technological Advancements in Procurement

AI and Automation: To manage the complexities of the supercycle, procurement teams are likely to adopt more advanced technologies like AI and automation. These tools can enhance spend analysis, supplier risk management, and procurement efficiency, allowing companies to better navigate the supercycle's challenges.
Digital Supply Chain: Adopting digital supply chain technologies will be crucial in managing the increased demand and complexity. Tools that provide real-time visibility and predictive analytics will become essential for maintaining supply chain resilience.

Shift in Global Trade Patterns

Reshoring and Nearshoring: Companies may increasingly turn to reshoring or nearshoring production to mitigate the risks associated with long, complex supply chains. This could lead to shifts in demand for logistics and transportation services, impacting the global market for commodities.
Diversification of Supply Sources: Companies will likely diversify their supply sources to reduce dependency on any single region or supplier, especially in critical areas like rare earth elements and semiconductors. This will impact global trade flows and the procurement strategies for commodities.

KEY TAKEAWAYS

The CAPEX supercycle has been much in the news recently (for example, here, here, and here) and represents both a challenge and an opportunity for the global indirect commodities market.

Procurement and supply chain professionals will need to adapt to increased demand, potential supply chain disruptions, and the need for more sustainable and resilient operations.
Those who can leverage advanced technologies and strategic sourcing will be better positioned to navigate the complexities of this supercycle, ensuring their organizations remain competitive in a rapidly changing global landscape.