The plunge in zinc and lead prices has signalled a resources bust according to an investment expert, while a Lehman Brothers-related commodities fund has closed due to massive losses.
In the past five years, resource stocks have outperformed the S&P/ASX 200, fuelled by demand from China and other emerging economies.
However, robust prices are unsustainable as US and European economies – also big consumers of resources – slow due to the credit crunch, Maple-Brown Abbott lead portfolio manager John Kightley said
“China is industrialising at the moment but does that mean the price of oil needs to be US$140 or price of copper US$4 [a pound]?” he said.
“In 1968 and 1969… if you read back in history you could see a very similar thematic when we had culminated in this debacle with a company called Poseidon.
“The thematic then was Japanese industrialisation. Of course it just pushed [metals] prices well above [sustainable prices].” Kightley said.
Poseidon’s share price surged from 80 cents in 1969 to $280 in 1970 with the discovery of a promising nickel site, when there was a shortage of the metal. It then crashed and de-listed soon after, when the nickel bubble burst.
Zinc, lead and nickel prices have plunged over 50 per cent in the last 18 months, causing stock prices of undiversified miners such as Mincor Resources, Kagara Zinc and Perilya to crash.
The Ospraie Fund, a US$4 billion commodities trust partly backed by Lehman Brothers, was shut down yesterday due to massive losses.
