Supply and demand for key commodities are out of whack, thanks to easy money policy. And that creates opportunities for savvy investors.
There is nothing for free.
So, Yes, the flood of cash from the world's central banks prevented the crash of the world financial system in the dark days after the collapse of Lehman Brothers and the near collapse of America international Group (AIG) and Citigroup (C). And Yes, President of the European Central Bank Mario Draghi promise to everything is necessary, has led to the rescue of the euro prior to the collapse of the market for Italian and Spanish Government bonds. And Yes, the big attraction triggered when China's economy prevents a hard landing, where the nation could have slipped growth rate below 7%. And, Yes, the Federal Reserve promises, at essentially 0% have kept interest rates the U.S. real estate market has finally.
But we are to count the cost.
Sometimes the price is obvious: produced in China it a real estate bubble, the landscape with ghost towns apartments, which is littered owned by speculators.
The price is sometimes obvious but delayed: one day the Bill due in higher inflation, higher interest rates and weaker currencies.
And the price is sometimes simply not too obvious. This is the case now in the area of raw materials, where a global policy of cheap money has transformed a modest slump sees a long, deep, depression in the hardest-hit sectors, such as natural gas, coal and iron ore, perhaps even likely.
How cheap money is a punishment recession for big commodity sectors related to the size already? Let me explain.
As if you my explanation of the link recession cheap money/goods purchase, I, you rethink your strategy and a schedule think investing in commodity stocks are submitted.
Jim Jubak
Let's start with the discrepancy between what I call the product depression and the slowdown of the world economy. Surely, the slowdown in China's economy should be-the drivers for the global market in raw materials from thermal coal, iron ore, copper-lead to a downturn of in commodity prices from their peaks.
A China growing at 10.4% in 2010 thanks to the country's post-global financial crisis stimulus efforts (let alone a 12% and 14% annual percentage rate grows China before the financial crisis), would consume as the economy of the country in the year 2012, more coal, iron ore, copper, oil, etc. as a China growing at 7.8%.
Take for example a look at iron ore. China's steel mills are the world's biggest consumer of iron ore (60% of global imports of iron ore are), and it makes sense that demand from China would slow down, how China's growth rate of close to 8% more moves 10% or 12%. Indeed: Goldman Sachs has projects in 2013 with the speed of the slowest growing of Chinese imports of iron ore in the past three years.
But remember that China's demand still is projected for imports of iron ore, by 4% in the year 2013--increasing. And global demand is expected to grow imports after iron ore by 8% this year.
Iron-ore prices, have already pulled back 6% this year. And the consensus among analysts surveyed Bloomberg projects that iron-ore prices fall additional 34% at the end of the year close to $90 per ton. (Iron ore sold $155 per ton at the local peak for about end of February 2013.)
The may not be the worst news. Prices could continue until 2014 and possibly until 2018, retreat according to the Morgan Stanley iron ore. Dignity to create a crisis that reflects the nine-year boom, the iron ore price rise saw seven times from the late 1990s, when the price was $15 to $20 per metric ton.
Forecasts for a huge drop in the price until end of this year and in the coming years sense not much considered only the demand side of the market however.
Rising demand from China for imports is 4% in 2013 and the price of iron ore is not only lower, but plunging film? Global demand climbed 8 per cent, but prices fall another 34% in 2013?
Ahh, take a look at the supply side. These same forecasts which say that worldwide demand is increasing by 8% in 2013 request also a 9.1% increase in seaborne supply (the default datum and for global iron imported ore because iron ore by my customers traveling by sea).
And this is only the beginning of a development that has grow to exceed demand growth, as well as new iron ore capacity comes online. Morgan Stanley projects that the global iron ore market in surplus in 2014 and that the surplus will transport continue to grow until 2018. This is not good for the price.
This basic history-slowed down but still solid growth in demand overwhelmed by a large increase in the supply-not with iron ore. The same falsely - single ply for certain Rohstoffmarkten--for raw materials as diverse as natural gas, thermal coal and copper.
Copper is projected, for example, to move to a global surplus in 2013, rising by 5.3% but offer as demand increases by 6.8% to 8% according to analysts.
The copper to a planned surplus of supply takes over demand by 330,000 tons in 2013 from a deficit of 95,000 tonnes in the year 2012 and 132,000 tonnes in 2011. Copper for delivery in three months closed at $7.958 a ton on 3. The average price for 2013 according to Goldman Sachs, $8.458 are a ton to $7,250 a ton fall in 2014.
This pattern of the bust and then back (commodity investors hope) raw materials is typical of the sector to boom boom. High prices lead producers increase their capital budgets and invest in new capacity. But it takes so long to find and these resources, which invests in new capacities, which then produces a temporary surplus in terms of reducing the result often in new capacity to develop over-investment, as each mining company prices.
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