Metals Bubble Is a Lead Balloon

Sometimes you learn the most interesting things when you are wrong for the right reason. Consider the following from yours truly in December 2002:

Metals buyers are an unimaginative bunch unlikely to risk either running out of necessary supplies or to take a speculative fling on an ingot or two. Industrial base metals are bought shortly ahead of when they will be needed, and their price constitutes a remarkably sensitive economic barometer.

Maybe the industrial-metals buyers are still conservative and unimaginative (what, do you think they hold audiences spellbound with tales of the fast-moving molybdenum game?), but the industrial-metals markets are anything but conservative these days. They are bubblier than a shaken can of warm beer.

Big Bucks, Small Markets

Financial players often are surprised at how small physical markets are. Take lead and zinc, two very prosaic base metals whose prices have risen 37.5% and 199%, respectively, over the past year. According to the International Lead and Zinc Study Group (yes, there is one), 3.309 million metric tons of lead were mined worldwide in 2005, and 10.008 million metric tons of zinc. At Friday's closing spot prices on the London Metals Exchange, this represented $4.193 billion worth of lead and $37.309 billion of zinc. ...