Let's talk theory

Forgive me while I ramble on a bit with some thoughts that have been running through my head.



Typically when the world is in turmoil and the economy is upside down there is not a lot of stuff going on and not a lot of demand for materials. This is my assumption.

Right now, the world is upside down and there is a rather large demand for materials. I base this on the fact that the price for scrap metals is basically at an all time high. Even being a recession where demand should be low. In my opinion, this demand has been greatly driven by China. I see no drop in their demand in the foreseeable future.

Now we all of a sudden have a natural disaster in Japan. They will rebuild and for all practical purposes, probably add an extra layer of demand on materials. They will have no less than two power plants to build from scratch as well as the infrastructure that was wiped out as well. (The two plants they are dumping sea water into in order to stave off meltdown, will now never be usable again. Those plants are now a wasteland).

If you take all of this demand for materials and couple it with a possible recovery of some sort I postulate that the scrap metal prices have nowhere to go but up right now no matter what happens. We will obviously see some highs and lows, but I look to see much higher prices in the future.

What say you?

I agree just so long as they dont use someone elses scrapmetal like chinas

thanks for sharing your thought....I like the way you think....and write

Well, if any of us could make a living as economists, or financial analysts, we probably wouldn't be trying to make a buck at the scrapyard, so take my thoughts for what they're worth.

It could just as easily go the other way. If this disaster drives the Japanese economy into a depression, rather than just the current recession, due to the cost of rebuilding, that could further drag down the world economy. That would probably result in a lower overall demand for metal products of all kinds, scrap included.

It'll certainly be interesting to see where we all end up...

I agree 100% with you parrothead....

http://www.reuters.com/article/2011/...72D12620110314

(Reuters) - Japan's already weak economy faces deeper damage than initially thought from the triple blow of a devastating earthquake, tsunami and nuclear disaster, and risks prolonging its sluggish recovery.

At worst, forecasts from some economists suggest the world's third largest economy is in danger of slipping back into recession.

I didn't go looking for that, but it was there as a related story to one I was reading about the Nukes.

Yes, the other side of the coin is everything getting worse to the point that even China stops using material. Worldwide depression qould surely suck. Thank goodness wifey is a nurse and I have my foot in the door as well.

Hoping for the previous scenario obviously. I would assume that the price of metals will tell some kind of story when the markets open this morning.

Another thought occurred to me, as I looked at this set of pictures. This thing has created an awful lot of scrap metal, which will be reaching the world market in the months to come. Even if reconstruction causes an uptick in demand for metals, that's going to be a slower and more drawn out process than the clean up. There could be a temporary fall in prices as scrap supply overwhelms demand.

And even if China's demand stays strong, that supply is a lot closer to China than our own supply is, so lower costs to transport it there.