The evolution of the PPI of copper ores

Since 2008, we have been reporting that the evolution of various components of CPI and PPI in the United States is not a random process but rather a predetermined one with long-term sustainable trends [1, 2]. Using these trends, one can predict consumer and producer price indices for various goods, services and commodities.  For example, in [3, 4], we presented the evolution many goods and services with varying weight in the CPI. But there are more goods, services, and commodities of interest for producers, consumers, and investors. Here we revisit the index for copper ores. This is an example showing that some commodity prices are not well predictable.

 

Figure 1 displays the difference between PPI and the index for copper ores since 1988. This difference has a remarkable history: no big change between 1988 and 2003, and then a sudden surge in the copper index started. The peak was reached in the middle of 2006. It survived before the second quarter of 2008. Then the copper index dropped by almost 300 units back to the PPI level. In 2010, the index increased above 500.  One may consider these changes as associated with the rise-fall cycles in oil price. We have to admit that there is no sustainable trend in the copper index and the future of the copper ores index. Currently, the difference is right in the middle between the previous peak and trough. It may go any direction in 2013. I would refrain from buying/selling any paper related to this commodity before the next clear sign of the future evolution. My best guess is the surge in price in the first half of 2013 and a steep fall in the fourth quarter of 2013.   

Figure 1. Evolution of the price index of copper ores relative to the PPI.