Materials Risk

Despite suggestions in much of the West that coal is a relic of an older age, the rock of concentrated carbon is likely to continue to be burnt to generate electricity across many developing and emerging economies far into the 2020’s, if not well beyond.

The image below is from the front cover of a recent edition of The Economist magazine. In their leader they highlight how coal consumption has dropped sharply in Europe and America (down by one-third since 2009) and how the mood towards coal has shifted against the fossil fuel in China: read more

“The government should pay people to dig holes in the ground and then fill them up.” – John Maynard Keynes

When its completed, London’s Crossrail project will stretch from the country of Berkshire, west of London, through the capital and out into Essex in the east. Initially scheduled to open in late 2018 the project has faced numerous delays and is now expected to open for passengers “as soon as practically possible” in 2022.

It’s not unusual for large scale infrastructure projects to go badly off course – both in timing and budget. Meanwhile, much like the ghost cities in China, one wonders whether the Crossrail project will turn into a massive white elephant when it does open. Built in the expectation of a surge in commuters, the world the rail project might open to in 2022 may be very different if WFH catches on and shaving 20 minute off the commute becomes irrelevant for most people. Therein lies the risk that faces infrastructure planners – trying to anticipate demands many years into the future. read more

“News is not important. It is the way the market reacts to the news that is important.” – Joseph E. Granville

According to economist Robert Shiller, the narratives constructed by the media are a powerful force that can sway people, industries and even whole countries, “[The] human brain has always been highly tuned towards narratives, whether factual or not…Stories motivate and connect activities to deeply felt values and needs. Narratives “go viral” and spread far, even worldwide, with economic impact.” read more

Every couple of weeks I send an email out to Materials Risk subscribers linking to some of the best research I’ve found freely available on the Internet – much of it published by investment banks and other institutions. While I endeavor to only send out the most interesting and thought provoking pieces I have stumbled across it’s important to state that some of it should come with a wealth warning, especially this time of the year.

You see, the start of the year often marks the point that investors, full of hope – or dread – for the year ahead feel compelled to make wholesale changes to their portfolio. Selling the dross that under-performed last year, and piling into the shiny new thing. This note of caution was prompted by a tweet from Real Vision founder Raoul Paul in which he outlines how asset managers approach the start of the year. read more

Research examining centuries of commodity price data has tended to sketch a pattern of 15–20 year super-cycles (a period of rising prices), followed by a slide in prices over the following 10–15 years when excess investment leads to a flood of excess supply.

The industrialisation of the US in the late 19th century, and the German build-up prior to World War I, drove an upswing in commodity prices in the early 20th century. The next upswing came after World War II because of the rebuilding of Europe and as the Baby Boomer generation entered the workforce. More recently the industrialisation of Japan, and the population growth and urbanization in many other emerging Asian economies, also contributed to an upswing in commodity prices in the 1970s and the early 1980s. read more

Research examining centuries of commodity price data has tended to sketch a pattern of 15–20 year super-cycles (a period of rising prices), followed by a slide in prices over the following 10–15 years when excess investment leads to a flood of excess supply.  

The industrialisation of the US in the late 19th century, and the German build-up prior to World War I, drove an upswing in commodity prices in the early 20th century. The next upswing came after World War II because of the rebuilding of Europe and as the Baby Boomer generation entered the workforce. More recently the industrialisation of Japan, and the population growth and urbanization in many other emerging Asian economies, also contributed to an upswing in commodity prices in the 1970s and the early 1980s.  read more