From State Street Global Markets, a simple argument that the end of the great commodity super-cycle is here:
1. In the 1970s, the commodity bull lasted 10 years. The recent run is also 10 years (2001-2011), and
the 10y compounded growth rate is very similar.
2. The China growth model based on property and fixed asset investment is now bankrupt. Return on
investment is collapsing. There is a non-trivial risk of a non-linear collapse of capex, which accounts
for 50% of GDP.
3. China policymakers plan to build 36m units of affordable housing by 2015, but this is only going
to absorb 50 million tons of steel this year or about one-sixth of China’s construction steel output.
4. More generally there is no desire to restart a property bubble that authorities spent a great deal of effort deflating.
Photo: State Street Global Markets