Ann: Construction and Production Teams Strengthened, page-85

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rusty02

3,848 Posts.

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31/07/15

10:29

Post #: 15726824
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Originally posted by Awoonga ↑

While everyone knows that supply and demand go hand in hand, the current situation is that the price is going down while demand for commodities has not fallen as much or not at all.
My understanding is the prices have dropped because of a current belief that future demand was not going to increase as much as in the past. Hence there is less urgency for the buyers to stockpile.
If that is the case then this period of downward prices will eventually ease when the normal forces of supply and demand come back into play.

In other words the prices have dropped much more than they should have if they were directly tied to current demand alone. There has been an over reaction to China's slowing economic growth. Some areas of growth need less commodities than others that is true but either directly or indirectly, the need for more commodities goes hand in hand with economic growth.
At the end of the day an increasing demand will eventually mean an increase in prices as supply lags behind.

All the above is Awoonga's economic reasoning only.

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Thanks Kalenn and agree as we are in the same situation of oversold spot with my Nickel play but demand has eased and cashflow will not be viable for 1% DSO or less if trends keep heading south. The issue I have is Economic growth and I agree with Awooga that these go hand in hand but sentiment in the commodities arena is absolutely getting smashed due to low economic growth forecasts and the double whammy with the US Fed's, increasing interest rates regardless whether AVB is related to the Reale and AUD (sorry spelling). The positive here is production in mid 2016 and supply drying up due to un-economical mining. Time for sentiment and commodities shorts to cycle in AVB's favour.
cheers

AVB Price at posting: 7.0¢ Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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