Industrialization and the Demand for Mineral Commodities

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Bonn Graduate School of Economics (BGSE)is gratefully acknowledged.Deutsche Post World Net is a sponsor of the BGSE. Industrialization and the demand for mineral commoditiesMartin Stuermer * November 15th, 2013Abstract What drives the long-term demand for mineral commodities? This paper provides empirical evidence on the long-run demand for mineral commodities since 1840. I extend the partial adjustment model to account for country-specific structures and technological change. I find that a one percent increase in manufacturing output leads to a 1.5 percent increase in the demand for aluminum and a one percent increase in the demand for copper. The estimated manufacturing output elasticities of demand for lead, tin, and zinc are far below one. The estimated price elasticities of demand are highly inelastic for all mineral commodities in the long run. My results suggest that industrialization in China, for example, will cause the consumption of aluminum and copper to increase at a considerably higher rate than the one of lead, tin, and zinc. All variables adjust slowly to equilibrium, which helps to explain the extended fluctuation in these markets.JEL classification: O13, Q31, N50

Determination of Copper Price Expectations in the International Market: Some Important Variables

“…The [4] work, which sought to identify factors responsible for long-term fluctuations in the prices of mineral commodities and, in particular, of copper, should be highlighted. [4] analyzed the behavior of annual prices over a long period: from 1840 to 2010.…”

“…The [4] work, which sought to identify factors responsible for long-term fluctuations in the prices of mineral commodities and, in particular, of copper, should be highlighted. [4] analyzed the behavior of annual prices over a long period: from 1840 to 2010. [4] evaluates only the global production of each commodity and the global income in each year, forming three different types of "shocks" in the commodity markets: supply shock or unexpected drops in copper production, such as mining strikes; shock of global activity demand or shocks in global demand for commodities, such as an unexpected growth in global activity; and other demand shocks, including all shocks are not related to the two previous categories, such as unexpected changes in stocks due to government strategic reserve programs.…”

“…[4] evaluates only the global production of each commodity and the global income in each year, forming three different types of "shocks" in the commodity markets: supply shock or unexpected drops in copper production, such as mining strikes; shock of global activity demand or shocks in global demand for commodities, such as an unexpected growth in global activity; and other demand shocks, including all shocks are not related to the two previous categories, such as unexpected changes in stocks due to government strategic reserve programs. Using an autoregressive vector model or a VAR model, [4] concludes that, in the case of copper, price fluctuations are mainly caused by demand shocks of global activity and also by supply shocks and other shocks demand shocks. That is, [4] shows that changes in the level of global activity, overall copper production and the level of stocks are relevant factors in the formation of the copper price.…”

“…Using an autoregressive vector model or a VAR model, [4] concludes that, in the case of copper, price fluctuations are mainly caused by demand shocks of global activity and also by supply shocks and other shocks demand shocks. That is, [4] shows that changes in the level of global activity, overall copper production and the level of stocks are relevant factors in the formation of the copper price. [4] makes an analysis of the impulse response function of these variables and stresses that a positive shock of demand for global activity causes a significant increase in the copper price, with the maximum effect appearing within a year after the shock, and with relevant effects still lasting up to 10 years later while the positive supply shocks have a negative impact on copper price, relevant up to 4 years after the shock, with immediate maximum effect though on a somewhat smaller scale than the demand shocks of the global activity.…”

“…That is, [4] shows that changes in the level of global activity, overall copper production and the level of stocks are relevant factors in the formation of the copper price. [4] makes an analysis of the impulse response function of these variables and stresses that a positive shock of demand for global activity causes a significant increase in the copper price, with the maximum effect appearing within a year after the shock, and with relevant effects still lasting up to 10 years later while the positive supply shocks have a negative impact on copper price, relevant up to 4 years after the shock, with immediate maximum effect though on a somewhat smaller scale than the demand shocks of the global activity. Finally, other positive demand shocks also cause an immediate rise in copper price, with relevant effects lasting up to two years after the collision.…”