So who actually knows what’s happening ?

Fundamentals. What a concept ? The mail used to arrive on time, a person answered enquiries, and supply and demand were relevant to the price of commodities. So easy to become nostalgic. Truth in its simplest form is fact, but many facts spun many ways by many people for many reasons create many interpretations and much confusion.

Lets look at what we know…..

Traditionally when consumption of copper was high and inventories low, prices would reflect this. Into this equation came other considerations like mine strikes and negotiations, and seasonal and other irregular considerations. These fundamentals gave analysts and market participants an idea of how to think and plan. The world has changed. Early in 2009 commodity prices started to climb. This normally would indicate an increase in consumption which would accompany a decrease in stocks of metals. But no. What we are witnessing is prices going up at the same time as stocks climbing and watchout, demand very, very low.

A significant factor in broad terms is that metals such as copper, zinc, lead, aluminium etc are no longer just metals connected to building and industrial development. These metals have become further arenas for speculation bringing with them the various financial instruments for gambling on just another market. With this comes a volume of trading by people who are totally removed from these metals in a production consumption context. This huge volume of trading in itself is a principal factor which draws prices further and further away from the basic historical rules of supply and demand. Much like the stock market where we sometimes see a price rise after a loss announcement ( for explained but still illogical reasons ).

The consequence of this is that following markets and trying to plan has become like currency trading and all other areas where volatility and large fluctuations have become the order of the day. This person cannot understand how the price of copper for example, can stay at current levels even rising in the short term, when real consumers are not overly interested. The recycling industry has always been a very good barometer of industrial activity. From where we sit the landscape appears very different to the picture being painted by analysts and various economic spin doctors. If and when the traders focus elsewhere, prices will find their true level.