Below are some of the versions we read about recently on the reasons behind the relentless price increase of commodities.
VERSION 1: Speculators
In the current global economic slowdown, it would be fundamentally reasonable to assume that consumption has gone down and prices have weakened. This indeed is the case for lead, zinc and nickel. Copper on the other hand has remained stubbornly resilient and is in striking distance of its previous all-time high despite the increasingly bearish fundamentals. The International Copper Study Group (ICSG) reported a production shortfall for 2007 of about 55,000 tonnes, which is the basis of the widely published conclusion that copper remains “tight”. However, the ICSG also states that those numbers make the assumption that all copper imported into China was consumed (Chinese consumption would have had to have been up 37%).
To find out what was actually happening statistically in China, one would look at the National Statistical Bureau (NSB) numbers to see what was produced plus what was imported, and subtract what was consumed. Consumption (3,990,000 tonnes) Production 3,441,000 tonnes Net Imports 1,350,000 tonnes Surplus Balance 801,000 tonnes In 2007 world refined copper production substantially exceeded consumption, by at least 750,000 tonnes.