Three Facts About World Metal Prices

Mei-Hsiu Chen, Kenneth Clements and Grace Gao ()
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Mei-Hsiu Chen: Business School, University of Western Australia

No 13-01, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: We argue that the workings of world metal markets can be characterised by three facts: Fact One: Global determinants of prices do not dominate market-specific ones. Fact Two (in its simplest form): The relative price of a metal is inversely proportional to its relative volume of production. If, for example, global iron ore production expands 10 percent faster than the average for all metals, then its price falls by 10 percent. Fact Three: Metal prices exhibit well-defined short-term cycles that tend to repeat themselves. These are not yet canonical facts, with proportional pricing arguably the most controversial. This paper shows that the three facts are still promising leads to understanding the evolution of metal prices.

Pages: 73 pages
Date: 2013
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