LAUNCESTON, AUSTRALIA – With the prices of many major commodities currently plumbing depths last seen six years ago, what are the chances of a repeat of the China-led boom that lifted resources out of the 2008 recession funk?
To answer the question it’s worth looking at what is the same and what is different about the weakness in commodity prices between 2008-09 and now, and the answer is not much is the same.
The main similarity is simply that prices are weak and have fallen precipitously in a relatively short period of time. Brent crude fell by about 75 percent between the all-time high in July 2008 and the low in December that year.
So far it has dropped about 52 percent from the last year’s peak in June to the close of $45.46 a barrel on Aug. 21.
Benchmark London copper futures dropped about 67 percent between July and December in 2008, and they have slumped 22 percent since July this year to the close of $5,055 a tonne on Aug. 21.
The wider story for copper is that it has been trending lower since the record high in February 2011, having lost about half its value since that time.
Spot iron ore prices in Asia only date back to November 2008, when, in common with crude, copper, coal and many other commodities, they started climbing rapidly as the global stimulus kicked in.
Iron ore more than tripled between November 2008 and the record high $191.90 a tonne in February 2011, and have now given back all of that gain to end at $55.60 on Aug. 21.
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