I'm sure most of us have noticed that all sorts of things cost more than they used to. We call it inflation, but what is behind it all?
Here is a really great article on the commodity boom by Lynley Donnelly. Amongst other things, it covers the main driver.
Reading that, I couldn't help thinking that the problem with COSATU's protest campaign is that it is happening in the wrong country. Somehow I don't see the urbanisation process of India and China changing their ways because of strikes and marches here.What is generically termed "the commodities boom" describes the rapid rise in prices of commodities like minerals, metals, agricultural goods and energy commodities like oil and gas.
The bottom of the commodity cycle came around late-2001 and early 2002. From then on, a steady rise in the price of commodities began, largely on the back of huge demand from developing economies like China and India.
China is in fact pivotal to the commodities boom. The rapid urbanisation of the more than billion-strong nation and its increased openness to international trade has ensured that the world's supply of raw materials become the roads, buildings and fuel for a country that in turn manufactures a huge portion of the globe's consumable products.
Having an interest in an electrical contracting company, this part also caught my eye:
Copper is outshining goldAccording to the PwC report, the top commodity performer is copper. It accounted for a total of 28% of all revenue generated by the top 40 companies.
One analyst has observed that the average copper price in 2002 sat at $1 559 a ton. In 2007 that price soared to an average of $7 121 a ton, a fourfold increase. Copper is chiefly used in plumbing and electrical applications. But with countries like China laying the equivalent infrastructure of two Eksoms a year, it is no wonder that copper is an increasingly precious resource.
The country also reportedly intends to erect some 40 000 or so skyscrapers between now and 2025. Imagine the electrical wiring and copper plumbing that will be utilised at that level of construction.