Key Takeaways

• Long-run demand for energy, copper, and grain has risen steadily for six decades, and electrification is adding a new layer of load on top of it.
• Processing of critical minerals is concentrated in a handful of countries, with China dominating copper, cobalt, lithium, graphite, and rare earths.
• Producers have prioritized balance sheets over growth. Oil and gas capex is projected to keep falling, and the past decade has added very little to the global copper pipeline.

The first two articles in this series made the case that real assets are one of the most under-owned corners of the market and that commodities are historically inexpensive relative to U.S. stocks, with a return profile that has improved as inflation rises.

Both of those arguments center around price and positioning. The final question we will answer in this series is the one that matters most for long-term investors: what is actually happening to supply and demand in the physical economy?

Structural Demand Keeps Climbing

Over the long run, demand for energy, copper and grain continues to rise alongside industrialization and electrification. Global energy usage has risen from roughly 40,000 TWh in 1960 to more than 160,000 TWh in 2024. Refined copper consumption has grown from about 5 million tonnes to roughly 28 million. U.S. grain consumption has nearly quadrupled over the same period.

Long-Run Demand for Energy, Copper, and Grain (1960 to 2024)

Source: USDA, ICSG, ourworldindata.org. Data as of December 2025. For illustrative purposes only.

The story these charts tell are centered on decades of industrialization, urbanization, and rising living standards, which have kept pushing demand higher through recessions, commodity busts, and three decades of investor indifference to the asset class.

Electrification Is Becoming A Major Demand Driver

Over the next decade, electricity demand is expected to rise significantly. Rio Tinto projects global electricity demand rising from roughly 32,600 TWh in 2025 to 46,700 TWh in 2035, an increase of about 43% in a decade. Industry, buildings, and primary sectors account for the largest share of the increase, with transport and data centers adding to it.

Electricity Demand Growth, 2025F to 2035F (000, TWh per year)

Source: Rio Tinto. Data as of December 2025. For illustrative purposes only. Not a projection of future results.

The investment implication is that more electricity requires more generation capacity, more grid, and more of the metals that go into both. Copper, aluminum, and the industrial metals complex sit at the center of that buildout, whether the generation source is natural gas, nuclear, or renewables.

Critical Supply Chains Are Highly Concentrated

If demand is diversified across the global economy, supply is not. The IEA's data on the top three producing countries for selected minerals shows that production is concentrated, and processing is more concentrated still. China alone dominates the processing of copper, cobalt, lithium, graphite, and rare earths. The DRC supplies the majority of mined cobalt. Indonesia leads nickel.

Top 3 Producing Countries of Selected Minerals and Fossil Fuels

Source: IEA. Data as of March 2025. For illustrative purposes only.

Concentration of this kind raises supply-security risk and has already started pulling policy and capital toward domestic and allied investment in mining and processing. That is a slow process, measured in years and permits, and it tends to raise the cost of supply rather than lower it.

Capital Discipline Is Tightening Future Supply

Supply is also being constrained from the inside. Global oil and gas capital expenditure peaked near $300 billion in 2013. It sits well below that level today and is projected to decline further through 2030. Producers have spent the past decade prioritizing balance sheets, buybacks, and dividends over new production.

Global Oil & Gas Capex ($bn), 2000 to 2030E

Source: Goldman Sachs. Data as of December 2025. For illustrative purposes only. Not a projection of future results.

From a shareholder's perspective, that discipline has been welcome. From a supply perspective, it means the industry is less prepared than it has been in decades if demand surprises to the upside.

The Copper Pipeline Is Running Thin

Copper illustrates the supply-demand mismatch most clearly. Exploration budgets rose from under $1 billion a year in the early 2000s to roughly $3 billion today. Yet the volume of new initial resources discovered has collapsed since 2010. Most of the copper produced today was discovered decades ago, and the past decade has added very little to the pipeline.

Copper Discoveries vs. Exploration Capex, 1990 to 2024

Source: S&P Global. Data as of December 2025. For illustrative purposes only.

Because a new copper mine typically takes 10 to 20 years to move from discovery to production, the supply response to higher prices is slow by construction. Even if exploration were to succeed tomorrow, the metal would not arrive until the mid 2030s, roughly when the electrification forecasts above suggest it would be needed most.

What This Means for Portfolios

Taken together, the three articles in this series describe an unusual setup. Real assets are under-owned, with allocations below 1% of fund assets. They are historically inexpensive relative to U.S. equities. And the fundamentals underneath them point to structurally rising demand meeting supply that is concentrated, under-invested, and slow to respond.

This is not a forecast for the next 12 months as commodity cycles have historically turned on a decade-plus clock (which the second article in this series showed) and they rarely turn on schedule. Investors should beware that demand forecasts can disappoint, supply discipline can break, and correlations can rise in a liquidity shock.

But for a portfolio built from a core equity fund and a core bond fund, the question is not whether to take a view on commodities. It is whether a near-zero allocation reflects any view at all, at a moment when the physical economy is being asked to deliver more than it has in a generation.

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