Industrial Insight

continued demand… | December 4, 2012

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9717728/The-worlds-commodity-supercycle-is-far-from-dead.html

The world’s commodity supercycle is far from dead

By Ambrose Evans-Pritchard, International business editor

7:46PM GMT 02 Dec 2012

Studies by the World Bank covering two centuries of data sketch a pattern of 10-year supercycles, followed by a slide for the next 20 years or so as excess investment leads to a flood of supply. The long bear market can be cruel for those hanging onto to resource stocks, convinced that the rebound must be nigh. …

Standing back, you might argue that commodities have held up remarkably well this year given that Europe has crashed back into double-dip slump, that the US slowed to stall-speed over the early summer, and that China itself has been through a quasi-recession with falling electricity use and rail freight, and a collapse in steel output.

For Brent crude to trade at $111 a barrel in such a bleak world suggests that Asia’s industrial revolutions have pushed oil prices to a structurally higher plateau. Energy costs may well punch higher once the next cycle of growth is under way.

No doubt the Malthusian narrative – peak this, peak that – at the top of the commodity boom four years ago was overblown. The US energy revival has shown how quickly human ingenuity can sweep away assumptions.

Yet all the nagging worries about resource depletion are still there. New supplies of oil are mostly deep in the ocean beneath of layers of salt, or in Russia’s arctic High North, or in Canadian tar sands at a production cost of $90.

The US National Academy of Sciences says that 26pc of all copper that ever existed in the earth’s crust has already been lost in usable form for mankind, and to my knowledge this claim has not been refuted. Platinum supplies are even tighter.

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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.

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