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posted 3 Dec 2008
People & places
Metals suffer Depression-era price plunge
Metal prices have fallen as far in the last six months as they did during the Great Depression of the 1930s, according to Barclays Capital’s commodities researcher Kevin Norrish.
Copper, lead and zinc have fallen by an average of 60% since the heady peaks of July this year and, as copper has been traded on the London Metal Exchange (LME) since 1877 and lead and zinc since the 1920s, it is relatively straightforward to compare the prices of the three metals then and now.
“Using annual average prices for these metals in 1929 as our base, the average decline in 1930 was 25%. Further significant declines were experienced in 1931 with prices finally bottoming out in 1933 at just 40% of their 1929 values,” writes Norrish.
Copper sank the furthest, falling to 30% of its 1929 value by 1932, as US GDP fell by 45% in under four years. Global copper production was slashed by almost 40%. Despite the formation of a copper producers’ cartel, the price of copper remained well below the cost of production for many mining companies.
Are we heading for a similar replay in the next few years? “Interestingly, the average price decline for copper, lead and zinc is already in the order of the maximum 60% loss of the 1930s. By individual metal, lead and zinc have already lost more value than they did in the 1930s. However, copper is not yet there, but were it to match its Depression-era losses in percentage terms then it could fall to the low $2,000s,” writes Norrish.
