Why the resource super-cycle is still intact - Natural-resource-based industries are very capital intensive, and hence extremely cyclical
Why the resource super-cycle is still intact - Natural-resource-based industries are very capital intensive, and hence extremely cyclical. Some of the cyclicality of these industries is a function of their being extraordinarily capital intensive. This lengthens the companies' response times to market cycles. Strengthening copper prices, for example, do not immediately result in increased copper production in many market cycles, because the production cycle requires new deposits to be discovered, financed, and constructed-a process that can consume a decade. Today, I believe that we are still in a resource supercycle, a long-term period of increasing commodity prices in both nominal and real terms. The market conditions of the past two years have made many observers doubt this assertion. But I believe the current cyclical decline is a normal and healthy part of the ongoing secular bull market. Read more here: (VIEW LINK)
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