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New Technologies Stem Metals’ Runaway Prices

December 31st, 2013 | by Morris Beschloss | Comments

With China, India, and several smaller Southeast Asian nations leading the way, growth in global demand has caused major mining companies to develop new technologies to greatly enhance the supply of such key components as iron ore, nickel, zinc and copper.

With growth of these key metals experiencing stratospheric supply demand, as well as spiraling prices, the price of ubiquitous nickel is a good example. This basis for stainless steel, which had increased 65.2% since the turn of the millennium, saw prices originally spike to $50,000 a metric ton as late as 2007, a quintupling of earlier prices, to less than $14,000 a ton recently. This happened as the intrepid Chinese found a sufficient lower grade nickel to serve that element’s major purposes.

This has evolved China into the world’s major nickel producer, producing 400,000 metric tons of nickel pig iron a year, equal to 20% of the world’s overall demand.

With similar technical degrees of cost-cutting impacting other popular metals, the International Monetary Fund’s index of all commodity prices is down about 12% from recent peaks. It had roughly tripled between 2000 and 2011. Copper is down 28% from recent highs, while thermal coal has fallen by more than half, since reaching an all-time high as late as 2008. The exception applies to such commodities as crude oil, which is still selling far above the fallen levels of just 10 to 15 years ago, with geopolitical consequences playing a major role.

In looking ahead to the vagaries of demand, and the evolutionary skill of major producers such as China, these developments will have an increasing impact on turbulent pricing, as well as overall production and availability.

This literal revolution in major metals and basic resources has also redounded in favor of China’s overall raw materials in general. While still a major importer of iron ore, oil and copper, China’s cement output in October 2013 was up 9% from the same level a year before. Furthermore, China’s output of 10 major nonferrous metals was up 12.9% in October, in comparison to the same month in 2012. This non-stop growth nation of 10 major nonferrous metals reached 3.28 million metric tons in that same October month.

This continuation of evolutionary technology and vastly increased production will have a definite disinflationary effect on a large segment of raw materiel and metals, adding to the long-term downward push on pricing in general that is inhibiting any medium-to-long term inflationary impact on commodity prices as a whole.

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