Analysts predict the decline in prices for industrial metals

Industrial metals, like other commodities, have experienced a period of sharp price declines. During the last few weeks, there has been an increase, but it was mainly a short-term.

The prices of industrial metals are linked to the economic cycle, because the industrial production of metals uses a decline in times of recession and an increase in times of expansion. It is also important to note that the industrial production is a fluctuating amount of GDP. While the intermittent change in GDP in the current crisis is usually in the percentage, the intermittent change in industrial production is often in the percentage.

When GDP and industrial production fall, factories do not need as many industrial metals and the demand for them weakens, which results in a fall in their prices. With expansion, prices have a tendency. In addition, the supply of industrial metals is relatively inelastic, which causes fluctuations in their prices.

The similarity of the development of metal prices

We do not examine the real development of metal prices, it is possible to wonder whether there are similarities in the development of prices of clay, copper, zinc and nickel or not. Theoretically, it can be expected in advance that the connection here must be, but it’s about how big.

The correlate matrix shows the correlate coefficients between many six pairs of selected metals. Values ​​can range from -100% to + 100%. The result of -100% means that there is a very strong negative relationship between prices – more or less one increases, so much more decreases. The result of + 100%, on the other hand, means a strong positive relationship – more or less one price increases, the more the price of another grows. The result of 0% then means that there is no relationship between prices.

Relationships between prices of selected metals
M Hlink Zinc Nickel
M 100 % 97 % 96 % 93 %
Hlink 97 % 100 % 91 % 90 %
Zinc 96 % 91 % 100 % 97 %
Nickel 93 % 90 % 97 % 100 %

There is a high positive correlation between our metal prices. It is strongest between the prices of clay and copper. This high correlation can be observed in the following graph.

It follows from the above that the one who thinks about the prices of industrial metals as one quantity will not make a big mistake. In the current crisis, industrial metal prices are behaving as the theory suggests. Roughly from the middle of last year, you have penetrated deep soil by about 70%.

Short-term rise in prices

In recent weeks, bag prices have started to rise. This is the bottom mainly due to the fact that the series for the management of mass reserves increased its reserves of industrial metals. After a long period of steady growth, London’s industrial metals began to decline.

The rise in clay prices was also caused by the arbitrator between the cheaper London Metal Exchange and the Dragoan Metal Exchange. The request from this bag will soon be over, because the stocks of metal will soon be replenished. Thus, the real economy is likely to decline at a slower pace and, for this reason, industrial metal prices will also fall.

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