Ernst & Young has released a report that addresses the cyclical nature of commodities, the abilities of analysts to forecast commodities prices, and what these two factors mean for the future of this sector.
Ernst & Young says metals analysts’ prediction of metal prices “have consistently and significantly lagged behind the actual spot market,” and that mining and metals equities have been undervalued. They also say, “It is our view that current metal prices are actually a return to sustainable price levels following an extended period of artificially depressed prices, rather than the conventional wisdom that the industry is near the top of a cycle.”
It will be interesting to see how this plays out if a recession takes place in the U.S. Will a recession in the U.S. affect the growth of BRIC countries and thereby the demand of raw materials?
Hat tip to Sufiy for the link.
High commidity prices are here until there is a stabilization of growth in China and India. I fear that given their rapid rate of growth and the shaky financial structure, that their growth curve is vulnerable. They have built such capacity that if their growth slows the raw materials flowing east will be looking for a home and it will be the U.S. Given our open borders and limited trade barriers the prices would plummet in this country for the industrial commodities.
When? Who knows?