http://www.tregernomics.com/mick-davis/

Sir Mick Davis answers this glut question in personal interview:

From Editorial:

Q: In your opinion, are the declining commodity prices demand driven, or are they a result of speculation?

A: No, I think it’s not a result of speculation. Speculation simply changes the level of volatility within a cycle, it doesn’t actually determine a trend, and so you can have a lot of volatility because of speculation and this might amplify different pricing trends. What is happening is actually not a decline in demand; although the growth in demand is lower than it was, there is still growing demand for commodities. The reason that commodity prices have come down very significantly is because the supply response of the mid 2000s is now coming through, with very significant supply which essentially can’t be easily absorbed in the current economic environment. So there’s basically too much capacity, and it’s driven prices down, and that will continue until that capacity is absorbed. This is where demand does come into it, it depends on your view on the rate of growth of demand on how quickly the new capacity is going to be absorbed. Until that is fully absorbed, prices are going to continue to be weak. They are in real terms right at the bottom of the cycle, so in real terms today’s prices are as low as they ever have been, which suggests that we should be nearing the bottom of the cycle.

GLTA,

TM