Finance and Forex Trading Forum

Frank Oz · Guest

Een kopie uit Mining News australia "The DryBlower"
Monday, 5 May 2008

IF YOU forecast a downturn long enough you will eventually be right. That
seems to be the policy of the world's commodity-price tipsters who,
Dryblower is amused to say, have failed miserably for five years, but who
refuse to give up.

Last week it was the turn of the crystal ball gazers at the world's top
investment bank, Goldman Sachs, to take a stab at what they think will be
the future trend in commodity prices, and guess what? They were up, in the
short-term, and then down.

Iron ore was the commodity attracting the most attention because it came
with a Goldman graph showing one more leg up the price scale to around
$US230 a tonne for premium-grade lump ore in 2009, and then sharply back
down to $US200/t in 2010, and down further in 2011.

In other words: next year's the peak, and then it's "boom over".

It is entirely possible that this time someone will get it right and perhaps
the clever crew at Goldman will win a gold star for picking the turn. But
ever since the resources boom started in 2002 there have been absolutely
identical predictions - up for a little bit longer, and then down.

Think about it. The forecasters were wrong in 2003, '04, '05, '06, and '07 -
so why should we believe them now?

This is one of the most interesting questions of the boom because it goes to
the heart of the matter. Are we dealing with a boom (and its inevitable
bust), or are we dealing with the long-term effects of an industrial
revolution which might last decades, and not years?

For economists who are paid to predict the future this is a dreadful time,
for two reasons. Firstly, everything they were taught at university has been
proven wrong for at least the past five years; and secondly because the
whole world can see the method they use, and it's wrong.

The method is simple. Look at what's happened in the past and assume it will
happen in the future. For the past 100 years it hasn't been a bad technique.
Commodity-price booms occurred when economic growth accelerated. Supply rose
to meet demand (and higher prices), and then supply exceeded demand and
prices fell.

One billion Chinese, and one billion Indians, and half a billion Russians
and Brazilians, not to forget fast-growing Vietnam and a few other emerging
countries are working against conventional economic wisdom.

They all want the comforts of a western lifestyle, and that means more iron
ore, copper, nickel, oil and coal than the world has ever produced before.

Economics, which isn't called "the dismal science" for nothing just can't
cope. It has a method so entrenched in historic precedent that satisfying
the appetites of a few billion "aspirational" people produces a result in
their equations which reads "do not compute".

The situation today reminds Dryblower of a time, many years ago, when he
studied economics, while also embarking on a career as a professional
scribbler for a daily rag. He soon discovered that academic thought, and the
real world, are miles apart.

There was back then, as today, a boom on the stock market and Dryblower was
enjoying happy days covering the market. In the evening he listened to
economics lectures and even tackled one exam question on how markets
behaved.

He failed spectacularly. Why? Because the academics said the answer was "too
practical".

The English translation of that situation is that while the answer was
correct, it was not in accordance with the academic syllabus.

Today, history is repeating itself. The academics are trying to "will" down
commodity prices because that's what their models say is supposed to happen.

Dryblower's response is: "show me the supply" - show me where the big new
copper, nickel, and manganese mines are. Show me the oil and gas fields.

This time, you dismal scientists, supply really is struggling to meet
demand. Small disruptions produce magnified price effects. China and India
are not about to stop growing at double the global rate.

The world really has changed, and while there will be bumps on the road, the
long-term trends which were once so reliable are now irrelevant.

Time perhaps to buy a new crystal ball.

Ejo · Guest

Frank Oz wrote:

Frank Oz · Guest

De commodities boom driver voor Ausie is China, alles gaat daarheen en er is
nooit genoeg.

Prettig nieuws dat China 85% meer wil betalen voor de Iron ore, met zo'n
bericht schieten de Iron miners met 10-20% omhoog .

Ik beleg veel in de miners maar het is niet eenvoudig en heel erg volantile
maar ook veel geld mee te verdienen, voor de kolen en staal miners is 200%
omhoog per jaar is normaal.

Ik koop dan meestal een quartet , 4 miners in kolen of iron of uranium om
zo te spreiden.

Het is jammer dat ik geen chart mee kan sturen, kijk eens op www.fmgl.com.au
, dit aandeel was 52 week low $2.50 en 52 week hi op $9.50

Sorry voor NL taal ik heb daar moeite mee.

Enjoy

China may agree 85% iron ore price rise
06/05/2008 10:41:48 PM

China may concede to Australian demands to include a freight premium
in iron ore price negotiations that could boost this year's price rise to 85
per cent, industry sources and a media report says.
There is a strong view within the Chinese industry that miners will
achieve the 85 per cent increase, exceeding a 65 per cent rise already
agreed with a key Brazilian miner, The Australian Financial Review reported,
citing an unidentified senior source at a leading iron ore trader in China.

The report said this was because Chinese steel mills were paying much
higher prices on the spot market than the existing benchmark price.

Industry sources in China added that the steel sector's brisk demand
for raw materials also supported expectations that they would agree to the
freight premium.

"Australian miners have been very tough during the negotiations,
because it is very obvious that Chinese mills are eager to obtain more iron
ore supplies to support the growing steel sector," said an executive with a
leading state-owned metals trading house.

China's crude steel output in 2008 is expected to grow about 10 per
cent from last year, to around 520 million to 550 million tonnes. The
country has taken the lion's share of additional iron ore production from
global miners, including BHP Billiton, Rio Tinto and Vale.

The trading house executive also said he thought an 85 per cent rise,
which was first mooted in research reports from several investment banks,
was "very likely because the banks are also shareholders of some of the
miners".

Asian steel mills' negotiations with the miners on annual term iron
ore prices have stalled over the proposed inclusion of a freight premium
sought by the Australian miners to reflect freight savings to China compared
with importing Brazilian ore.

The 65 per cent benchmark increase was negotiated by rivals including
Brazilian miner Vale.

Officials at Baosteel Group, which represents Chinese mills in the
price negotiations, and the China Iron and Steel Association have repeatedly
said that China would not accept a freight premium. No comment was
immediately available from officials of the two entities.

Several Chinese industry sources believed that Baosteel, the
state-owned parent of Baoshan Iron and Steel, might accept a premium on the
top of the deal agreed with Vale after positive comments on steel prices by
a Baosteel executive.

Baoshan Iron and Steel President Fu Zhongzhe told the state-run China
Securities Journal that the company's steel prices were likely to remain at
a high level into the third quarter.

The listed unit had said in its 2007 annual report that the outlook
for China's steel market was still unclear.

Baosteel usually announces third-quarter prices in late May. Some
steel traders in China said they had heard that Baosteel was considering a
marked rise in steel prices for the July-September quarter.

Baosteel raised its major steel product prices 17 to 20 per cent in
the second quarter after raising first-quarter tags as much as eight per
cent. Analysts have said the hikes would help the company to pass along
rising raw material costs to its customers.

"It seems that Baosteel is confident," said a senior manager at a
Baosteel rival. "They may have come up with some justification for rising
prices, both for iron ore and steel products."

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"Ejo" <nospam@nospam.org> wrote in message
news:48228e9c$0$14357$e4fe514c@news.xs4all.nl...