Question: if you'd cleared space in your
garage on Jan. 1, 2009, for a ton of No. 1 heavy melt scrap, a
couple of hundred pounds of copper and an ounce of gold, which
would have proved the smartest investment a year on?
Leave aside the fact that, in the months
following the near-collapse of the financial system, it seemed
no-one was buying anything, let alone "commodity" products that
were in the midst of the mother of all corrections. Metal
prices were still tumbling sharply a year ago, and if you'd
offered producers-even many buyers-a price rebound that was
half the size of the one that materialized in the spring,
they'd likely have bitten your hand off.
Extend the time period back a bit further and
you get some surprising results. Analysts at Barclays Capital
recently ran a similar calculation for the past decade and
found that, of all exchange-traded commodities, natural gas
would have been the best buy 10 years ago, with prices rising
an average of 142 percent this decade vs. the 1990s on an
inflation-adjusted basis. For metals, platinum was the top
performer, recording an increase of 83 percent, while aluminum
prices rose a measly 4 percent.
It's no surprise that big gains have been
made in the physical metals market, too. A look back at AMM's
first issue of the decade shows our weekly shredded scrap price
at $130 per ton vs. $285 in mid-December 2009 and hot-rolled
sheet at $17 per cwt vs. $25 in the same comparison. Given that
the dot-com boom was approaching its height 10 years ago, you
certainly would have got long odds on a humble ton of scrap
providing far better long-term returns than the Nasdaq
Of course, if this decade had ended 18 months
earlier the gains would have been much more impressive. But
while few people saw the crash coming, now that the dust is
just about settling it's possible to look ahead to what the
not-too-distant future holds.
We're not foolhardy enough to attempt to
predict what the metals markets will be like in 2020-as Yogi
Berra said, it's tough to make predictions, especially about
the future-but in this issue AMM's reporting team has taken the
temperature of the market and flagged a few trends and events
likely to affect the metals markets over the next 12 months. We
hope that at the very least they'll generate some debate.
And in answer to the original question:
copper, which more than doubled in price in the first 11 and a
half months of the year, was the best performer of the three,
outstripping a nearly 40-percent increase for heavy melt and a
30-percent jump in the gold price. If anyone's brave enough to
predict which metal will hold value the most in 2010, we'd love
to hear from you.