Commodities for Every Portfolio: How You Can Profit from the Long-Term Commodity Boom

Preface

It is no secret that commodities have been on a tear of late. On one end of the spectrum, agricultural commodities have roared to new highs, and on the other end, metal prices and energy prices have rallied off their most recent lows. Even commodity markets that have struggled over the last year have quickly turned around in the midst of increased demand from the same old players, China, India, and other developing economies. To put things into perspective, Chinese imports of copper picked up a staggering 44 percent in January 2007 after many analysts prematurely predicted a slowdown in Chinese copper demand.

Indeed, there seems to be no end in sight to this commodity boom. Demand continues to be robust and supply constraints continue to be of concern. Of course, the increased need for raw materials by China and other developed economies (as well as the continued need for these same materials by developing economies) is a sizable reason for this continued demand growth. This demand has become so intense that many countries are looking at securing the vital natural resources that are needed for economic survival.

In 2005, for instance, China National Offshore Oil Corporation made a bid to purchase Unocal Oil. While this bid did not go through (Unocal eventually merged with Chevron), it did reaffirm China's emergence on the global commodity scene. In early 2007, China's two largest steel companies–Baosteel Group and Wuhan Iron & Steel Group—made it known that they were interested ...