By Chris Berry
- With the commodity super cycle changing its complexion and looking for direction, we continue to believe that the metals markets don't have the "wind at their backs" anymore.
- It has been surprising to see many metals prices either bottom or shoot higher in the face of a slowing China and a sluggish global economy haunted by the specter of deflation.
- Can this upward bias in select metals prices continue given this backdrop?
- We continue to argue for SELECTIVITY amongst metals and companies as a crucial component of your investment selection until the next leg up of the cycle begins.
We're Still at a Bottom…But for How Long?
After enduring two terrible years in the metals markets, it has been a welcome respite to see several....
- We first wrote about tin in September 2013. Since then the price of tin has strengthened markedly
- Tin remains in backwardation in the futures markets implying a need for more supply – now
- Factors such as falling grades in existing mines, increasing use of tin in technological applications, and increasing cost inflation are all coalescing to paint this rosy picture
- However, the main culprit for the supply squeeze and subsequent price spike is the Indonesian Government
- A looming supply crisis for tin is still very much a possibility out to 2015-2016
So Far, So Good
Late last year, I presented the investment case for tin as a metal to watch in 2014. Thus far, this has proven to be a prescient move and there appears to be little reason to shift focus. With the growth slowdown in Emerging Markets and renewed economic uncertainty in the developed world, one would think industrial metals such as tin would be trending solidly downwards. As the chart below from the LME shows, this has not been the case, with tin up over 3% year-to-date.