Industrial Insight

reasons I could be wrong on steel casting demand to produce commodities… | August 30, 2012

http://www.macrobusiness.com.au/2012/08/pettis-hard-commodity-prices-will-halve-in-2-years/

Pettis: Hard commodity prices will halve in 2 years

Posted by Houses and Holes in Commodities on August 29, 2012

For these reasons I am very pessimistic about hard commodity prices and expect them to drop substantially further in the next two to three years.

1. Production capacity for hard commodities is rising much too quickly, in a belated response to the unexpected surge in demand just under a decade ago.

2. Expected economic growth rates in the country that has been biggest source of new demand – virtually the only source – have fallen sharply and commodity prices have fallen with them. Historical precedents and the arithmetic of rebalancing suggest, however, that the current consensus for medium-term Chinese growth is still too optimistic. Expected growth rates will almost certainly fall further in the next two years.

3. Beijing has finally become serious about rebalancing China’s economy, and rebalancing means shifting Chinese growth away from being disproportionately commodity intensive. Instead of representing 30-60% of global demand for most hard commodities, Chinese demand will shift to a more “normal” level. Remember that even a very limited shift – from 50% of global demand, for example, to a still high 40% of global demand – represents a sharp drop in global demand.

Advertisements

Posted in Uncategorized

Leave a Comment »

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

Search

Navigation

Categories:

Links:

Archives:

Feeds

%d bloggers like this: