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Fisher Investments on Materials by Brad Pyles, Andrew Teufel

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6
CASE STUDY
The 2003 to 2007 Bull Market in Materials
 
 
 
Now we can see the previously covered drivers at work by examining the Materials bull market from 2003 through 2007, focusing particularly on metals.
Today, emerging market countries are some of the primary basic materials consumers, and of metals in particular. In 2007, they consumed over 50 percent of global copper and iron ore production.1 This wasn’t always the case. The developed world was the dominant consumer and growth driver for many years. This changed over time as emerging markets began to industrialize. When the emerging markets’ growth rate and industrialization process rapidly accelerated, its consumption of basic materials also began to dramatically impact global materials demand.
Emerging markets weren’t the only consumption drivers during this period. Another structural change was the rebuild of aging developed market infrastructure. Much of the developed world was industrialized over 100 years ago. Pipes, bridges, roads, dams, and other infrastructures showed increasing deterioration and in some cases began to fail, requiring significant repairs.
Table 6.1 Metal Prices 2003 to 2007
Source: Thomson Datastream; International Monetary Fund.
Metal(%) Return 12/31/02-12/31/07
Copper337
Nickel272
Zinc218
Silver216
Iron Ore*189
Platinum156
Gold144
Steel**94
Aluminum77
Source: Thomson Datastream; International Monetary Fund.
* Iron ore fines, 67.55% iron content (FOB)
** US Imports Hot Rolled Coil Steel (FOB)
The impact ...

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