Timeframe for Boom in Commodity Prices

[RobPE]

I was wondering what are some of your thoughts regarding the timeframe for the boom in commidty prices we are currently enjoying. An article in a recent issue of SME's Mining Engineering addressed the issue, but in the end never came to a prediction. I've heard people talking about the current boom lasting another 5-10 years. I've also heard talk of the 5-10 year low for Copper being anywhere from $1.10-$1.50/lb with the high being at it's current level of $3 and change. What are your thoughts??

 

[bulkhandling]

It seems people who can answer the question are not on this forum. They are making big money from the market.

For me to predict the copper price, just simply not believe it can drop back to anywhere below 1.5 $/lb, although demand may drop a bit and new mines (or smelters) are going to be started. Since China and India are expanding demands, and since copper is not a renewable resource, not like that for pulp and paper industry, I expect that the world will still be anxiously looking for new deposits in the near future.

 

[Backfill]

RobPE:
Recognize this reply is from a recovering geologist become engineer...
I think the timeframe will hinge primarily on demographics, which definitely are out of the realm of this forum. But I bet the demographers are simply scaling up the take-off points for the industrial and green revolutions, as well as glomphing them together since Indian and Chinese development may benefit from the synergies of both those waves. That is, the amplitude oughtta be something.

There may be some relative moderation of commodity usage and pricing due to the efficiencies established since the earlier North American and European industrial expansions. Nonetheless, the simple demographics are going to drive commodities dramatically for quite a while.
This 52-yr old expects to be busy as long as desired, certainly beyond 10 years since my kids are still in junior high and high school. And whether mining-related or not, they probably will have careers serving economic sectors affected by the Indian and Chinese expansion.
Do you reckon Adam Smith spoke Mandarin or Cantonese?

Given the discovery-to-production lead times, a ten year horizon for high commodity prices is virtually a given. These lead times may not change markedly with 'relaxed' environmental constraints in the expanding economies. The relative remoteness and lack of industrial infrastructure may keep the lead times fairly long. Also, the 'relaxed' environmental constraints are tightening on a project-by-project basis, if not quicker. The developing economies, even the forced ones, are finding that the market will bear clean air and water, just like the developed economies have found.

Oh, and if inflation is taking off, all bets are off on where copper's new bottom will be... .

Perhaps the greatest differences between previous expansive markets and the current situation are the intervening technological revolutions, as in materials and information handling. Nonetheless, the heavy lifting in power and fabrication still will require copper and iron. And the glamorous materials still will require petroleum for either raw material or process energy.

Any way you cut it, commodities should remain strong for at least ten years, probably more. Any dips simply will be market opportunities within a rising trend. That's where I've put my IRA.

Best of fortune.

 

[EdStainless]

I focus more on Ni than Cu, but the market dynamics are similar.
1. Right now there is enough metal alvailable, but no extra. People are paying a premium out of fear of supply disruption. This premium may be about 30-40% of the current selling price.

2. In the near future (18-36 months) the premuim will come down, prvoded there are no major supply disruptions, new projects stay on track, and basic economics hold relitivly steady.

3. Longer term (3 years +) the prices will not drop to the levels of five years ago without a major global recession. I expect markets to stay more volital than in the past. One reason is that with China and India being bigger factors you need to remember that the market aspects of their economies are not well developed yet.

I see current price levels cutting into potential growth, but prices that are 50% lower than today are still 50% above histroical levels (roughly).
I see long term strength in commodities, nothing like hte last couple of years, but good enough for a 10 year ride.

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