I think your chart is an excellent on to keep in mind and the analogy to 2006 is a strong one. I'm not sure we should expect history to repeat itself exactly though. I think history recapitulates rather than repeats. For example in 2006, I doubt there was a market participant like Glencore sitting in the sidelines with 500kT/year of idled capacity. Yes, this capacity will take 15-18 months to bring back on stream. Yes, it can be brought back on stream incrementally and will be managed to maximise Glencore's profit. But I would still expect a longer more rounded peak to the pricing this time compared to then. Glencore will want to avoid a situation where other players bring on large amounts of supply. Apparently they have calculated this price to be US$1.60/lb. Barring a Chinese recession, I think we can expect to see prices stabilise around there within about 3 months and trade at that level for the medium term.
Cheers,
Tim.
RVR Price at posting:
24.0¢ Sentiment: Buy Disclosure: Held
