July 20, 2015

There is an interesting picture developing between Emerging Market Equity Performance and the Performance of Industrial Metals Prices.

The chart below shows the % Drawdown from the trailing peak level of the GSCI Industrial Metals Index (Aluminium, Copper, Zinc, Nickel and Lead) and the MSCI Emerging Equity Index.


There is an extremely high correlation until 2012… then there is a marked divergence. Why is this?

Look at the aggregate level of the inventory of Industrial Metals in the LME (London Metal Exchange) warehouses (metric tonnes).

Aggregate inventory is 73% Aluminium – Aluminium stocks have fallen 30% from their peak in late 2013 and are down 29% year/year.


Short Emerging Equity/Long Industrial Metals anyone? …Inventories of Industrial Metals are falling fast!