The Gold Report: You recently wrote a paper called “Stagnation: The New Paradigm?” where you put current commodity prices in perspective by showing charts going back to 1999. What happened over the last five years in iron ore and copper and what can we expect going forward?
Raymond Goldie: The price of iron ore from 2011 to 2015 dropped more than 70%. If you look at the other great indicator of the mining industry—the price of copper—you find a similar, but smaller, decline over the same time period.
[Copper chart located above. Data: London Metal Exchange.]
TGR: What were the fundamentals both behind iron ore and copper’s astronomical moves up going back to 2004 and the subsequent falls?
RG: Iron ore prices really started to rise in 2008 because of increasing demand for infrastructure needs globally. Copper received added attention in China as it became seen as money right alongside gold. Chinese bankers started using copper, especially for foreign trade financing, which helped push copper prices up to levels that may not have been sustainable.
In both cases, the main reason for the following shift down was that supply had increased faster than demand.
Both iron ore prices and copper prices are, even at their relatively depressed levels today, higher than any price that they’d ever seen before 2006.
TGR: The continuing trend lines that you have on both iron ore and copper in these charts show slow, steady growth going forward. What prices are you expecting in 2016 and beyond?
RG: One of the things I’ve learned is that I’m not particularly good at forecasting prices. The forward strip markets, the futures prices on the London Metal Exchange, incorporate the aggregate of expectations and are better at forecasting prices. That seems to be calling for a steady increase in copper prices over the …read more