This chart has a lot to say so let's dive right in.
1. The price of copper compared to the price of aluminum either grows over time (as seen in the exponential growth line) OR there was a one time jump at the end of World War II (as seen in the two median lines).
2. Either way, the price of copper currently seems very expensive compared to the price of aluminum.
3. In 1973, had you known stagflation would appear then you would have been far better off hoarding aluminum than copper, even though aluminum is the most abundant metal in the Earth's crust.
Here's another chart to think about.
Aluminum is a recent discovery. It does not have the 5,000+ years of history that copper has. That said, aluminum is clearly very important to us. The world now produces roughly 10 pounds of aluminum for every 4 pounds of copper.
Henry Ford
The Model T was introduced on October 1, 1908.
Automotive Aluminum Use Reaches All-Time High In 2009
A new study by Ducker Worldwide, commissioned by The Aluminum Association, Inc., confirms that in North America the use of automotive aluminum is at an all-time high, averaging 8.6 percent of vehicle curb weight in 2009 calendar year vehicles, up from just 2 percent in 1970 and 5.1 percent in 1990. Additionally, the integration of aluminum in cars and light trucks is projected to be nearly 11 percent of curb weight by 2020.
Wilbur Wright
The Wright brothers, Orville (August 19, 1871 – January 30, 1948) and Wilbur (April 16, 1867 – May 30, 1912), were two Americans who are generally credited with inventing and building the world's first successful airplane and making the first controlled, powered and sustained heavier-than-air human flight, on December 17, 1903.
Boeing CEO Calls Tanker Contest 'a Price Shootout'
Boeing engineers, Mr. McNerney says, are also studying whether they will build a new plane out of the traditional aluminum or use composite material like the type used on the new 787 Dreamliner.
"I don't think we know yet if [any new plane] will be predominately aluminum or composite," he says. "Certainly, we'll use more composite and titanium components on whatever we build in the future."
Nothing is ever easy. Perhaps titanium is a safe store of value?
You will note that it is not adjusted for inflation. The red trend line is the median price over the period. Buried cash performed similarly.
What is Titanium Sponge?
Titanium sponge is a porous form of titanium that is created during the first stage of processing. In its natural form, titanium is widely available within the earth’s crust.
Get in now or forever be priced out! Again! The earth isn't making any more titanium! Why do I suddenly sound like a chief economist at the NAR?
Source Data:
USGS: Historical Mineral Statistics
Here's a bonus aluminum chart to consider.
ReplyDeleteAlcoa did a Wal-Mart style rollback... of its stock price.
Here's another bonus chart:
ReplyDeletehttp://finance.yahoo.com/echarts?s=BHP+Interactive#symbol=BHP;range=my
BHP rolled back the rollback!
Copper is a "sure thing" as long as the Chinese have an insatiable demand for unaffordable real estate.
Is the copper mainly used for electricity wiring or used more in actual electrical products?
ReplyDeleteI could see world-wide demand for both staying strong if we see developing countries keep up their growth. China is great, but there are couple billion more people who may be moving up soon. I'd say look at the growth rates in the top 10 most populous developing countries ex-China and see how they are doing before I would count copper out for sure.
Coba
mab,
ReplyDelete"Enough said!"
Coba,
ReplyDeleteCopper: Industry Usage
Construction comes in at #2 and its #1 use is also part of the "building industries".
Coba,
ReplyDeleteCopper is very much a China story.
Here is the data as of 2008.
USGS: Copper-A Metal for the Ages
The booming economy in China contributed to a tripling of its annual refined copper consumption during the 8 years from 1999 to 2007.
Based on the chart within, China's consumption of copper was about 1/3rd of the world's consumption and roughly 10 times more than all of India.
If you believe in the China story and think it will continue, then copper makes sense. On the other hand, if you don't believe in the China story and think Jim Chanos is right to believe it is on a "treadmill to hell", then copper makes little sense.
I'm in the latter camp. I think with oil at nearly $75+ per barrel and copper at $3+ per pound, there's ample room for Chinese consumption pain.
Copper Futures Advance to 11-Week High on Prospects for China, U.S. Demand
ReplyDelete“Growth in Asia is pretty powerful,” said Dan Smith, an analyst at Standard Chartered Plc in London. A rebound in the U.S. “is only going to add to the recovery,” he said.
Oh yes. Not only is growth in Asia powerful, but it is pretty too. Further, I'm definitely waiting with wild anticipation for that U.S. rebound!
MaxedOutMama: April Was The Peak
Iron ore exporters look at domestic mart to offset fall in global demand
ReplyDeleteSpot iron ore prices in Asian market after ruling high at $185 a tonne also dropped to around $140 a tonne on the back of sluggish Chinese demand.
Iron ore is harder to hoard it would seem.
September 17, 2009
China’s Pig Farmers Amass Copper, Nickel, Sucden Says (Update1)
The metals holdings by pig-farmer investors and other private speculators give “the impression that there is strong demand in China,” said Jiang at Shanghai Oriental. “But it is actually those who take a pessimistic view of the economy and are looking to preserve their wealth who are buying.”
Is chinese building accelerating?
ReplyDelete- jus me
jus me,
ReplyDeleteIf Jim Chanos is right and China is on the "treadmill to hell", then I suspect the PBoC is getting a decent workout right now. ;)
I found the following article interesting.
The PBoC can’t easily raise interest rates
One of the problems with a severely repressed financial system, especially one with rapid credit expansion, is that there tends to be a huge amount of capital misallocation supported by borrowing, and in an increasing number of cases it is only the artificially-reduced borrowing costs that allow these investments to remain viable. I worry that even if the PBoC wanted to raise rates, it would not be able to do so without exposing how dependent borrowers are on artificially cheap capital.
...
In fact there were strong rumors last year that the PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB against the dollar during the 2005-08 period of currency appreciation. Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses (although I notice that Sovereign Trends’ Terrence Keeley, in an OpEd in the Financial Times Tuesday, seems also to have done the numbers).
OK, so Chinese have been using more copper than India...is this due to industrialization, housing, export markets or over investment? Or just electrification?
ReplyDeleteIndia, Indonesia, Pakistan, Bangladesh: if these countries start to pick up the low hanging fruit China doesn't want to make anymore...do they also have a copper consumption boom or not?
Interesting note on PBoC interest rate problems...if they have inflation and don't want domestic unrest, would they instead let the currency appreciate instead of raising interest rates (which would add more pressure to do that any ways?) I wonder how many commie leaders own tons of real estate? That's their preferred way of making money.
Red A,
ReplyDeleteConstruction booms use large amounts of copper, construction busts not so much.
http://www.businessweek.com/news/2010-07-20/copper-jumps-most-in-three-weeks-on-u-s-building-permit-gain.html
"Builders are the biggest users of copper and use about 400 pounds (181 kilograms) in the average home."
As for the Chinese currency, I think their export market is top priority. I'm not even convinced their currency is overvalued. We're sure told it is, but perhaps it only makes sense if their economic miracle is for real.
I'm not much of a currency trader though. I can say, using hindsight, that when the euro was expensive we were mistakenly told to buy it, and when it was recently cheap we were told to sell it. Figures.