Commodities Shift from Trading to Portfolio Construction

For years, commodities were viewed mainly as trading instruments rather than long-term investment assets. However, this perception is changing due to structural shifts in commodity markets.

Sunil Katke, National Head of Commodity-Retail at Kotak Securities, notes that commodities are now seen as an important component of long-term portfolio construction.

The conversation around commodities has shifted from 'Can I trade commodities?' to 'What role should commodities play in my portfolio?', according to Katke. This change is attributed to structural themes such as deglobalisation, energy transition, infrastructure spending, supply-chain realignment, central-bank diversification, and geopolitical uncertainty.

Copper has emerged as a key example of this shift, with its demand driven by electrification, renewable infrastructure, grid investment, EVs, data centres, and power infrastructure. Supply growth for copper is becoming increasingly difficult due to new mine development taking years, declining grades in mature assets, and significant permitting and capital requirements.

Katke also highlights the importance of AI and data centre demand driving copper prices. He believes that while short-term corrections are inevitable, the market is increasingly recognizing that copper could command a structurally higher long-term valuation due to supply concerns.