Oversupply, especially of bulk commodities, remains a challenge however, and demand continues to be heavily affected by China’s economic policies as it moves forward with economic reform. The commodity rally is refreshing and well under way, but is also experiencing a bump in the road – with likely a few more on the horizon! Prices have retreated in recent weeks, but year-to-date performance is still impressive, beating other asset classes by a wide margin. Investors, however, are now no doubt reflecting whether the recent retreat is a bump in the road or will become embedded. On the supply side, there is good news of continuing restraint, following many years of unconstrained production growth in a race to satisfy the optimistic demands of the super-cycle. After the super-cycle, many projects were placed on hold as companies adjusted to new financial realities; these projects remain on hold despite the commodity price rally. Rio Tinto's annual iron ore guidance of 350 million tonnes – down slightly from its full capacity of 360 million tonnes – is a good example of supply-side discipline. Unfortunately, the market still has to absorb Vale’s US$14.5 billion, 90-million-tonne per annum S11D mine, in construction for many years and slated for first production late in 2016. Production constraints are helping commodity prices, but the strong performance year-to-date can only be partly attributed to supply constraint. Underlying excess production capacity remains a problem, yet to be fully resolved. The rash of massive expansions and new developments in the iron ore industry in particular will take several more years to absorb fully. Other bulk materials, and perhaps to a lesser extent base and precious metals, are also in oversupply. Demand improvement early this year may have been misled by the impression that a strong new up-cycle was underway, entirely driven by a fundamental resurgence of demand from China, the world’s largest commodity consumer. The demand improvement was, in fact, driven by China’s interim stimulus policy targeting infrastructure investments, creating a period of commodity liquidity. Unlike the 2009 stimulus programs during the global financial crisis, the 2016 stimulus satisfied the policy mission to achieve structural supply-side adjustments consistent with China’s longer- term goal of moving to a consumer-driven economy. China is capable of economic fine-tuning and no doubt will continue to calibrate annual growth targets and commodity supply/demand, consistent with economic reform. The commodity rally has shifted the mining industry from a rout of persistent mine closures, asset sales and project curtailments, to a refreshing optimism which has attracted investor institutions back to the sector. Mining stock prices have risen dramatically, doubling and sometime tripling from record lows. The commodity price rally this year clearly reflects the start of a new phase of recovery following the extreme price lows at the end of the commodity super-cycle. (Written by Peter Jones, Executive Vice President, Century Global Commodities Corporation)