Long-term cycles might seem pointless to investors looking for quick returns. But are they?
Rod Beddows, a business economist in the steel sector, addressing the ONG Bank’s Natural Resources conference in London last week, took a long-term view and set the sector into a particularly long-term context, looking back as far as the 1950s. While at first pass this may seem somewhat overdone, it did in fact make a lot of sense, because there is arguably more of a parallel in steel (and other key components of infra-structure) with the 25 years to 1975 than there is with the subsequent twenty years.
This is because during the earlier period, Germany was re-industrialising and Japan was industrialising, two very significant sources of growth, In the latter period, while the re was some industrialisation (Taiwan, Korea), this cannot be compared in terms of the quantum leaps of previously. The oil crisis, rather than impeding growth, was responsible for a rash of improvements in efficiency.
Consequently, between 1950 and 1975, steel production grew at roughly 6% per annum on average. In the period 1975 – 2000, growth was a mere one per cent per annum. Between 2000 and 2003 it has again been 6% per annum, with China and India now taking up the reins.
Full article at Metals Place