The 2012 CRU commodity price ladder

ALLAN Trench looks at how commodity prices will pan out for the balance of 2012 – with the assistance of the CRU commodity price ladder.
The 2012 CRU commodity price ladder The 2012 CRU commodity price ladder The 2012 CRU commodity price ladder The 2012 CRU commodity price ladder The 2012 CRU commodity price ladder

ladder

Staff Reporter

With the start of the footy season fast approaching, tipping competitions as to where the different teams will end up on the AFL ladder are starting to do the rounds of emails.

Will Collingwood fare well this year? Your scribe suspects it will be no surprise that the Magpies will be right up there around finals time. How about Geelong then? Yes, and no doubt the Blues will be highly competitive too.

When it comes to the likes Melbourne, Adelaide, Port Adelaide, the Brisbane Lions, Suns, North Melbourne, Fremantle and Richmond however, the answers start to get far tougher. One suspects that several of these teams will struggle but that one or more might surprise to the upside.

The same question could be asked of mineral commodities – and indeed often is. Which commodity prices are on the way up – and which prices are on the wane?

Exactly that question was recently asked of CRU’s respective commodity analyst teams. The result of their analysis is the CRU commodity price ladder. The commodity price ladder cites the forecast rankings for commodity prices in 2012 when benchmarked against each commodity’s Q4 2011 starting price point.

Commodity watchers may be surprised by some of the rankings among minerals and metals on the 2012 ladder revealed below.

But before revealing the answer as to the winner of the 2012 CRU commodity price “flag”, your scribe asks you to consider which of the following markets you might first choose as your favourite for the premiership this year.

In alphabetical order – the contenders for the 2012 commodity price ladder are:

Alumina

Aluminium

Ammonia

Cobalt

Coking Coal

Copper

Gold

Iron Ore

Lead

Manganese

Met Coke

Molybdenum

Nickel

Palladium

Phosphate

Platinum

Potash

Silver

Sulfur

Sulfuric Acid

Tin

Uranium

Urea

Vanadium

Zinc

To the mechanics of the compilation: These were straightforward but are recounted here for the record.

Step1 - CRU analysts across each of the above markets compiled their average price forecast for the 2012 calendar year

Step 2 - A reference date was chosen; set at the price averages for Q4 2011 for each market.

Step 3 – Markets were ranked from high to low based upon the anticipated movements of commodity prices relative to the price at the reference date. All relative prices were referenced to US$.

And for 2012 the winner is … sulfuric acid!

Your scribe is guessing that few readers will have picked that one. Why? Sulfuric acid winning in the commodity price rankings against a field including the likes of iron ore, copper and gold is akin to Melbourne or Port Adelaide winning the AFL premiership by out-pointing Geelong, Collingwood and St Kilda. It is possible – but a surprise.

Sulfuric acid finished bottom of the mid-year 2011 CRU commodity price rankings (see Strictly Boardroom July 25, 2011) – with the related price weakness placing the commodity in a strong position to rebound into 2012 in price terms.

Good hunting.

The 2012 CRU commodity price ladder:

1. Sulfuric Acid

2. Palladium

3. Tin

4. Molybdenum

5. Alumina

6. Met Coke

7. Copper

8. Potash

9. Nickel

10. Vanadium

11. Zinc

12. Aluminium

13. Platinum

14. Gold

15. Iron Ore

16. Uranium

17. Silver

18. Lead

19. Manganese

20. Cobalt

21. Sulfur

22. Urea

23. Phosphate

24. Coking Coal

25. Ammonia

Allan Trench is a Professor of Mineral Economics at Curtin Graduate School of Business and Professor (Value & Risk) at the Centre for Exploration Targeting, University of Western Australia, a Non-Executive Director of several resource sector companies and the Perth representative for CRU Strategies, a division of independent metals & mining advisory CRU group (allan.trench@crugroup.com).

*With thanks to Peter Ghilchik, CRU Group peter.ghilchik@crugroup.com

This article appeared first in ILN's sister publication MiningNews.net.

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