Commodity price hot spots 2010

SOME metals and minerals will be hotter next year in price terms than this year; others will not – and of course some of the less volatile commodities will stay pretty much the same. Allan Trench synthesizes the CRU commodity price weather forecast for 2010.
Commodity price hot spots 2010 Commodity price hot spots 2010 Commodity price hot spots 2010 Commodity price hot spots 2010 Commodity price hot spots 2010

 

Staff Reporter

It has become the norm over recent years for weather forecasters on television to be selected from particularly attractive people; presumably to distract the viewer from feeling miserable on those occasions that it is going to bucket down with rain.

If not yet fully established as a trend in Australia, I can confirm from extended stays in the UK that the TV weather forecasters there are very attractive indeed – perhaps for obvious reasons given the propensity of the British summer to be as damp as a scene from the Poseidon Adventure.

It is the subject of weather that brings me around to the theme this week: the CRU commodity price “weather forecast” for 2010.

Even better, from the 200 or so analysts at CRU, it falls to your scribe to play the role of weather forecaster.

So rest assured that as I type this text, I am sitting here attempting to look particularly attractive – not an easy task as it is 7am and I have yet to shower, shave or put on my make-up.

For those readers not yet accustomed to the CRU “weather forecast” process it works like this. Some poor soul (guess who?) has the job of collating the collective views of the CRU analysis teams that specialise in the individual commodities of the Periodic Table*.

Forecast average prices for a future period, in this case 2010, are compared to a reference level – in this case the prevailing commodity prices as at the start of September 2009.

Those commodity prices set to rise in relative terms percentage-wise are then flagged as having sunny outlooks of varying denominations in the weather forecast.

Conversely, those commodities forecast to soften in price are tagged with damper outlooks.

Now there are some prevailing misconceptions, or cognitive pitfalls, which I should address before revealing the weather forecast (first aired at last week’s Excellence in Mining conference in Sydney).

Firstly, everything is relative. Prices shown as softening may be doing so from a relatively high starting level – so a damp outlook may not directly correlate with margin pressures for producers of that commodity.

The converse is also true of course. Those commodities forecast to rise in price may in some cases be referenced from a low-base; hence even “take your sunscreen” is a relative term.

With those “health warnings” out of the way, here are the actual results. The fact that clients pay for the specific forecast numbers means that I am unable to release those here – however, for guidance, “take your sunscreen” means a forecast rise exceeding 15% in price relative to the benchmark whereas “cold snap” refers to a projected fall of that magnitude or higher.

All prices in the calculation are referenced to the global trading currency and are hence in US dollar terms not Australian dollars.

Take your sunscreen – met coke, cobalt, urea, met coal, gold

Sunny spells – iron ore, ammonia, molybdenum, sulfur

Mild – uranium, tungsten, phosphate rock

Scattered showers – copper, aluminium, vanadium, tin, platinum

Cold snap – alumina, silver, nickel, zinc, bauxite, lead, palladium, sulfuric acid

Now it is time for a shower; a hot one for me that is, not rain outside. Good hunting.

Allan Trench is Adjunct Professor of Mine Management & Mineral Economics, Western Australian School of Mines and a Non-Executive Director of several resources sector companies. He is the Perth representative for CRU Strategies, the consulting division of independent metals & mining advisory CRU group (allan.trench@crugroup.com).

*With thanks and appreciation to Michael Insulan – apprentice CRU weatherman.

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