Broadening the statistical search for metal price super cycles to steel and related metals

Abstract

During the past five years, industry analysts have proclaimed that metal prices are in the early phase of a ‘super cycle,’ driven primarily by Chinese industrial expansion. Academic economists have generally been very skeptical about the presence of long cycles. A time-series econometric analysis by Cuddington and Jerrett [2008. Super cycles in real metals prices? IMF Staff Pap. 55(4), in press], however, has used band-pass filtering techniques to isolate super cycles in the prices of six metals traded on the London Metal Exchange (the ‘LME6’). This paper extends the search for super-cycle behavior to three additional metal products that are critical in the early phases of industrial development and urbanization: steel, pig iron, and molybdenum (a key ingredient in many steel alloys). There is strong evidence of super cycles in these three metals, although their timing differs to some extent from the super cycles found for the LME6.