Friday, September 30, 2011

Commodity bear market?

"If you don't have demand, you don't have to worry about shortages." - CA market analyst on assessing metals markets

"we are being held hostage on growth concerns..."  HSBC analyst

That says it all as we look down the performance hole. While we have been talking about low inventory to usage, it does not matter if demand is declining. Stock to usage will increase and pressure will relieve from markets. The commodity markets re in a bear market with a decline of over 21 percent since April. The decline in commodities is greater than what has been seen in global equity markets. We have seen the biggest quarterly drop since the debacle in 2008. Copper fell for the third straight quarter which is the longest slump since 2001 according to Bloomberg. Inventories are building in warehouses. Some of this is due to arbitrage but excesses are occurring. The commodity markets will be weak in the short-run.

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