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The past may be prologue but it's not necessarily a reliable forecasting tool 


Question: if you'd cleared space in your garage on Jan. 1, 2009, for a ton of No. 1 heavy melt scrap, a couple of hundred pounds of copper and an ounce of gold, which would have proved the smartest investment a year on?

Leave aside the fact that, in the months following the near-collapse of the financial system, it seemed no-one was buying anything, let alone "commodity" products that were in the midst of the mother of all corrections. Metal prices were still tumbling sharply a year ago, and if you'd offered producers—even many buyers—a price rebound that was half the size of the one that materialized in the spring, they'd likely have bitten your hand off.

Extend the time period back a bit further and you get some surprising results. Analysts at Barclays Capital recently ran a similar calculation for the past decade and found that, of all exchange-traded commodities, natural gas would have been the best buy 10 years ago, with prices rising an average of 142 percent this decade vs. the 1990s on an inflation-adjusted basis. For metals, platinum was the top performer, recording an increase of 83 percent, while aluminum prices rose a measly 4 percent.

It's no surprise that big gains have been made in the physical metals market, too. A look back at AMM's first issue of the decade shows our weekly shredded scrap price at $130 per ton vs. $285 in mid-December 2009 and hot-rolled sheet at $17 per cwt vs. $25 in the same comparison. Given that the dot-com boom was approaching its height 10 years ago, you certainly would have got long odds on a humble ton of scrap providing far better long-term returns than the Nasdaq composite.

Of course, if this decade had ended 18 months earlier the gains would have been much more impressive. But while few people saw the crash coming, now that the dust is just about settling it's possible to look ahead to what the not-too-distant future holds.

We're not foolhardy enough to attempt to predict what the metals markets will be like in 2020—as Yogi Berra said, it's tough to make predictions, especially about the future—but in this issue AMM's reporting team has taken the temperature of the market and flagged a few trends and events likely to affect the metals markets over the next 12 months. We hope that at the very least they'll generate some debate.

And in answer to the original question: copper, which more than doubled in price in the first 11 and a half months of the year, was the best performer of the three, outstripping a nearly 40-percent increase for heavy melt and a 30-percent jump in the gold price. If anyone's brave enough to predict which metal will hold value the most in 2010, we'd love to hear from you.

Kevin Foster

Managing editor

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