Metal Price Term Structures Hint At Good News for Miners

John Robertson

PortfolioDirect

The term structure of metal prices is reflecting some moderate tightening in market conditions at the end of February. The weekly PortfolioDirect investment report uses a model based on the term structure of metal prices as the shortest term of its five cyclical positioning guideposts. (VIEW LINK) Based on daily prices, the indicator provides a timely pointer to changes in market conditions. A narrowing of spreads and a move from contango to backwardation is indicative of emerging shortages. The accompanying chart summarises end of month changes in the term structure since 2002. It is showing the first move to backwardation in 15 months. The model on which the chart is based uses London Metal Exchange prices over a three year forward horizon for the principle daily traded nonferrous metals.


John Robertson
John Robertson
PortfolioDirect

John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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