Saturday, August 25, 2012

Copper to Aluminium Price Ratio

First the data in graphical format for 12 months (source: Bloomberg), 20 years (source: Bloomberg terminal) and 110 years (source: USGS Copper and Aluminium).

As of 23 August 2012 the ratio stands at 4.08, which is the maximum which has been achieved since the beginning of the time series in 1900. Since 1950 the Cu/Al price ratio has peaked three times (at 1.75 in 1956, at 2.25 in 1973 and at 1.84 in 1991) and then strongly reversed to a price ratio of almost 1.

Typically the reason for the reversion of Cu/Al price ratio is substitution (of Copper usage by Aluminium). Normally this takes time, but there is no fundamental reason, why this will not happen again over the next few years.

In one of our next posts we will look at substitution.

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