Some one sent this note to me, It's a bull market thesis for Copper in coming years. As I've mentioned, I
do believe that we'll see many commodity bull markets over the next 3 to 5 to 8 years. The driver of this would
most likely be the Central Banks having to create very large amounts of liquidity to stem, the deflationary
aspects of the the Stock market bubble,as well as to keep the debt bubble that has been created from imploding.
And As we saw with oil, and natural gas prices, when crude fell from 27 in Oct of 1997 down to just above
10in Q1 of 1999, we had a collapse in new exploration and drilling. This lead to a supply shortage
and when demand picked, Crude almost quadrupled, getting to over $37 dollars a barrel in the nearby contract
back in March of 2000. Natural Gas prices in 1999 to 2000 went from the $1.50 area to over $12 by the end of
2000 (Basis the Jan 2001 NG contract).
So undoubtedly supply and demand excesses breed a future price move in the opposite direction.
We cyclically have had big bull market in commodities every 20 to 40 years in the past and there is no reason,
that this cyclicality should not continue into the future.
here is the post, and I certainly agree that increased Asian consumption, will contribute to stronger demand
going forward.
John
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New area of interest -
Subject 19142
Ultimately the lack of investment in Cu mines over the past 2 years will lead to strong bull market. Same story for Zn.
The market in 2001 should be in a deficit per the copper council and such, but I think they are using overly optimistic projection of global growth for this year. That said, the driver of Cu demand for the past 10 years has been Asia, so industrial growth there is a nice leading indicator. Not necessarily Japan, but the 5 tigers and China.
Take a look at what the Asian crisis did to copper on the bottom chart. (registration is worth it, and no spam in my email).
metalprices.com
Some #'s
East Asian (china, Japan, 5 tigers, phillipines) % of world consumption.
AL 30%
CU 35%
Ni 38%
Sn 43%
Zn 32%
Oil 22%
Moreover, consumption of commodities is more variable in Asia vs. the more established economies, with large swings from years of growth to those of contraction.
Any thoughts? |
