Titanium - Almost as Inexpensive as it has Ever Been

Inflation Adjusted Historical Titanium Price since 1941 - in Pounds Sterling and US Dollars

Titanium is a metal used in a variety of industrial application, from aerospace to marine, due to its high strength-to-weight ratio, high corrosion resistance, fatigue resistance, and crack growth resistance.  So I decided to examine the long term price history and inflation adjusted historic price of this industrially important metal.

The annual average titanium price was estimated from the price data for titanium sponge metal from 1941 to 2010 which came from the US Geological Survey.  The historical UK Pound to US Dollar exchange rate data came from Lawrence H. Officer, "Dollar-Pound Exchange Rate From 1791", MeasuringWorth, 2011 at www.measuringworth.com/exchangepound/.  The prices were adjusted for inflation by converting the nominal price into the equivalent in 2011 US Dollars and 2011 GP Pounds Stirling.  The US inflation data came from the historical CPI from the US Department of Labor.  The UK inflation the data came from Grahame Allen (2011) "Inflation: the Value of the Pound 1750-2011" Economic Policy and Statistics Section, Research Paper 12/31, House of Commons Library, UK.  From this you get the following results shown in the chart below. 

Historical Annual Average and Inflation Adjusted Titanium Price since 1941 in US Dollars and UK Pounds

The doted lines are the unadjusted nominal annual average titanium price, and the sold lines are the inflation adjusted titanium price. The first thing that becomes obvious is that the unadjusted titanium price was at its lowest in the in late 1961’s till the early 1970’s in both US Dollars and Pounds Sterling at approximately $1,040 and £2,900 per a metric tonne respectively. Additionally the nominal price peak occurs in 1981 and 2006 at approximately $8,400 and £17,000 in 1981 and $11,000 and £23,000 in 2006 per a metric tonne respectively.

However when you examine the inflation adjusted titanium price, you notice that its lowest prices occurred in 2003 in both US Dollars and UK Pounds Sterling at approximately $5,500 and $9,000 per metric tonne respectably.  The closest the inflation adjusted price came to those lows in both currencies, occurred in 1992 and 2010 approximately at $7,500 and £13,200 respectively.  The inflation adjusted titanium price experienced a constant fall until the early 1960’s whereupon it stabilised until the late 1970's.  This can be more easily seen in the chart below which only shows the inflation adjusted price on a linear axis (non logarithmic, unlike the first chart).

Inflation Adjusted Titanium Price since 1941 in US Dollars and Pounds Sterling

As it came be seen the general trend in the inflation adjusted prices was a steady decrees until the 1960’s where it stayed relatively constant (by historic standards) until the present day.  Even though there was a rapid increase in the real price in the late 1970’s, which peaked in the early 1980’s, it was nowhere near the inflation adjusted price before the late 1950’s.

Using the price in 1941 as a baseline, the inflation adjusted titanium price in UK Pounds and US Dollars was indexed.  This clearly shows how much the real price of titanium has dropped since the 1940’s.  By the bottom in the price, which occurred in 2003, it was approximately 4.88% of the price in 1941.  Even with the recent rally in the inflation adjusted price, by 2010 the price was still only just over 6% of that in 1941.

Historical Inflation Adjusted Titanium Price since 1941 in US Dollars and GB Pounds, Indexed to 1941

Even the relative price changes since the 1970’s show that by 2010 the inflation adjusted titanium price is still relatively cheap since that time.  This can be easily seen in the chart below, were the inflation adjusted titanium a price was index to that from 1975.  The price in 2010 was just under 40% of the real price in 1975 and reached a maximum in 1981 of twice compared to 1975. 

Historical Inflation Adjusted Titanium Price since 1941 in US Dollars and GB Pounds, Indexed to 1975

So from a historical perspective, once inflation has been accounted for the price of titanium is almost as cheap as it has been in the last eighty years.  Even compared to the real inflation adjusted prices in the 1970’s the price by 2010 is below the historic average of that period.

Written by Inflation Monkey. Join on Google+

Britain’s Biggest Economic Disadvantage - Their Housing Market - MoneyWeek

Britain’s Housing Market Has Left The Economy Paralysed

Here is a very interesting article from Money Week Magazine, regarding the UK housing market and its risk to kill the merger GDP growth even more than their Olympic-sized Government debit levels. With rapidly slowing global growth (in both the developed and developing world) our politicians and central bankers seem to be at a loss as to how to deal with it. 

Sir Mervyn King (Governer of the BoE) reckons that the basic problem is the banks are still sitting on too much bad debt. The debt needs its value written down (or written off) and the banks then need to be patched up (again). All that needs to happen before banks are willing to lend again.  The tr ouble is, the “significant writing down of asset values” that King refers to, would involve allowing house prices to fall.  In Britain, house prices are the single most important economic indicator, politically speaking. When house prices are falling, governments lose elections.  It’s why public policy in the UK is to keep the property market from collapsing.  

So unless there is an external factor which forces the politicians hands don't expect the policy to change.  It funny but one of the reasons Britain did well after it fell out of the fixed exchange rate mechanism (ERM) was that while it was in it the politicians hands were prevented from printing money to provide a quick economic/political fix.  Resulting in them having to implement political difficult and painful (to vested interest groups) labour market reform which provided a long term improvement to employment and GDP growth, as explained by the former UK Chancellor of the Exchequer Norman Lamont in an interview in the Daily Telegraph Newspaper on the 20th anniversary of Black Wednesday, Britain’s exit from the Exchange Rate Mechanism (ERM). 

It reminds me of an old quotation from the former UK Prime Minister Sir Winston Churchill:

"You can always count on Americans to do the right thing - after they've tried everything else" (just replace Americans with politicians)

Food for thought isn't it?

Click here is see Moneyweek - Britain’s biggest economic disadvantage - our property market

Average Income for Pensioners Has Never Been Better! (Statically at Least)

Here is a very interesting chart from the Economic Research Council Weekly Digest Chart of the Week, which was on the Average Income for Pensioners.  A recant report from the ONS showed how pensioners' net income has changed over the past ten years and it is largely good news for pensioners as they received on average 27% increase in their real income. However things aren't all rosary, when you investigate the number in detail thee is still a large amount of inequalities still exist.  

Click here is see the Average Net Income Distribution of UK Pensioners.

Expect UK house prices to fall as banks pull back from the property market - MoneyWeek

The Prospects for the UK Housing Market Don't Look Promising!

The most important drivers of the UK property market is borrowers’ access to credit.  Until the resent credit crunch, almost everyone had forgotten about this and thought is was just aspirational and want that drove it.

So with this in mind how is the UK property market going to perform in the next few years.  statistics - Banks are pulling back from property - expect prices to fall. 

Macro Man: Life's Little Luxuries

The Italian Government Takes No Prisoners In Its War On Tax Evaders

If you are in any doubt about the scale of the super yacht exodus accros the Club Med Countries have a quick look at this report on empty marinas across Italy.

Meanwhile who’d want a new Ferrari after last year’s campaign against tax evaders – which involved tax inspectors raiding the owners of luxury cars in smart ski resorts and visiting Ferrari-owner events to check the tax returns of every single driver?  According to the blogging hedge fund manager at www.macro-man.blogspot.com the “persecution of Ferrari owners” has become so severe that they are selling them in their thousands. You can now pick one up for the “price of a new VW Polo”.

This is not only bad for Ferrari but all Luxury Car companies, not only are sales being hit by general austerity and shocking enforcement of the law, but global second hand prices are likely to be hit by the new exodus of cars from Italy.  “This is going to be “a vicious value collapse” says Macro Man.

Will this mean people will be turning against ostentatious wealth, and luxury brands associated with it?

Copper Price is as Expensive as it was in the 1970s – Inflation Adjusted Historical Copper Price since 1900 in Pounds Sterling and US Dollars

Copper Price Today is as Expensive as it was in the 1970s Once Accounting for Inflation

Copper in a common metal which as been used since ancient times.  Due to its very good electrical and thermal conductivity it used in a very wide range of industrial applications from wires cables to sea water corrosion resistant bronzes used to make marine propellers.  Because of this it is often refereed to as one if the bellwether industrial commodities, which are used to trend the health of global industrial production. 

Over the last couple of years, I have repeatedly come across comments that copper has never been this expensive and that this will push  up the price of consumer goods or cause industrial production to slow or contract.  There are some reviews of the copper market and price such
as the following:
"What to do as Dr Copper turns bearish" 
"The Copper Yuan Carry Trade"
"Copper and Global Stock Markets Rollover"
"Copper Price Forecast, The Fall of The ChineseMiracle 2012" 

However these don’t usually cover the long term price history or adjusted to account for inflation, so I thought that I would investigate.

The annual average copper price data since 1900 to2010 came from the USGeological Survey.  The data for 2011 and the early part of 2012 came from the World Bank.  In both cases the price data is based on the average price of Grade A cooper traded on the London Metals Exchange (LME).  The historical UK Pound to US Dollar exchange rate data came from Lawrence H. Officer, "Dollar-Pound Exchange Rate From1791", MeasuringWorth, 2011 at www.measuringworth.com/exchangepound/.  The prices were adjusted for inflation by converting the nominal price into the equivalent in 2011 US Dollars and 2011 GP Pounds Stirling.  The US inflation data came from the historical CPI from the US Department of Labor. 

For the UK inflation the data came from Dominic Webb (2006) "Inflation:the Value of the Pound 1750-2005" Economic Policy and Statistics Section, Research Paper 06/09, House of Commons Library, UK.  From this you get the following results shown in the graph below.

Historical Annual Average and Inflation Adjusted
Copper Price since 1900 in US Dollars and UK Pounds

The doted lines are the unadjusted nominal annual average copper price, and the sold lines are the inflation adjusted copper price.  The first thing that becomes obvious is that the unadjusted copper price was at its lowest in the in 1932 in both US Dollars and Pounds Sterling at approximately $128 and £36 per a metric tonne respectively.  Additionally before 2012 the nominal price peak occurred in 2011 in both US Dollars and UK Pounds at $8,823 and £51504 per a metric tonne respectively. 

However when you examine the inflation adjusted copper price, you notice that its lowest prices occurred in 2002 in US Dollars at $2,089 and in 1999 in UK Pounds at $1,465 per metric tonne.  The closed the inflation adjusted price came to those lows in both currencies, occurred in 1932, 1945, and 1993.  The highest inflation adjusted price happened in 1916 in US Dollars and Pounds Sterling at $12,962 and £9,383 respectively. 

The historic inflation adjusted copper prices in US Dollars and UK Pounds can be more easily seen in the chart below which only shows the inflation adjusted price on a linear axis (non logarithmic, unlike the first chart).

Inflation Adjusted Copper Price since 1900 in US
Dollars and Pounds Sterling

As it came bee seen the general trend in the inflation adjusted copper prices was a high volatility before the 1920s, were upon it experienced a sharp decrees by the early 1920s.  Prices were relatively stable from the 1920s until the end of the 1940s, in competition to the price volatility see before the 1920s.  During the 1950s there was a sharp rise to $7,662 and £6,775 in US Dollars and GB Pounds respective.  The price dropped almost 50% by 1958 in both currencies, where upon it steadily increased to peak in 1970 and 1974 at a price similar to that in 1955.

From the peak in 1974 the price steadily decreased to an all time inflation adjusted low by 2002 in US Dollars at $2,089 per metric tonne.  In UK Pounds the all time inflation adjusted low occurred in 1999 at $1,465 per metric tonne and this was almost matched again in 2003 at £1,483.  Since these lows the inflation adjusted copper price was increases rapidly to prices comparable to those seen in the 1970s.

Using the price in 1900 as a baseline the inflation adjusted copper price in UK Pounds and US Dollars was indexed.  This allows the examination of the relative price changes during this historical period of time more easily and is shown below.

Historical Inflation Adjusted Copper Price since
1900 in US Dollars and GB Pounds, Indexed to 1900

The indexed price data clearly displays that the historic inflation adjusted copper price has drop since the 1900s but not by any ware as much as the inflation adjusted aluminium price had done.  By the early 2000s the copper price bottomed at almost 20% of the price of what it was in 1900.  This was slightly lower than the previous bottom in 1930.  The current copper price by the beginning of 2012 is comparable to the inflation adjusted prices in the 1970s, which were slightly lower than the average in the years before the 1920s.

So from a historical perspective once inflation has been accounted for the price of copper is comparable to the peaks seen in the 1970s.  This begs the question, as copper is used as a bellwether the health of global industrial production, does this means the developed economies are due to repeat the economic difficulties that were experienced in the 1970s?

Written by Inflation Monkey. Join on Google+

Aluminium the Metal that has Never been so Inexpensive – Inflation Adjusted Historical Aluminium Price since 1900 in Pounds Sterling and US Dollars

 The Metal that has Never been Cheep - Aluminium

Aluminum is a silvery white metal used in a wide verity of industrial application and in consumer products.  It is the third most abundant element and the most abundant metal, in the Earth's crust.  Aluminum is a remarkable metal due to its low density and for its ability to resist corrosion via passivation.  Many of the structural components made from aluminium and its alloys are vital to the aerospace industry and are important in other areas of transportation and structural materials.

Aluminum forms strong chemical bonds with oxygen.  Compared to most other metals, it is difficult to extract from ore, such as bauxite, due to the high reactivity of aluminum and the high melting point of most of its ores.  For example, direct reduction with carbon, as is used to produce iron, is not chemically possible because aluminum is a stronger reducing agent than carbon.  Aluminium electrolysis with the Hall-Héroult process consumes a lot of energy.  Electric power represents about 20% to 40% of the cost of producing aluminum, depending on the location of the smelter.

There are some reviews of the aluminium market and price, but these don’t usually cover the long term price history or adjusted to account for inflation, so I thought that I would investigate.

The annual average aluminium price data came from the US Geological Survey and it dates back to 1900.  The historical UK Pound to US Dollar exchange rate data came from Lawrence H. Officer, "Dollar-PoundExchange Rate From 1791," MeasuringWorth, 2011 at www.measuringworth.com/exchangepound/.  The prices were adjusted for inflation by converting the nominal price into the equivalent in 2011 US Dollars and 2011 GP Pounds Stirling.  The US inflation data came from the historical CPI from the US Department of Labor.  For the UK inflation the data came from Dominic Webb (2006) "Inflation: the Value of thePound 1750-2005" Economic Policy and Statistics Section, Research Paper 06/09, House of Commons Library, UK.  From this you get the following results shown in the graph below.

Historical Annual Average and Inflation Adjusted Aluminum Price since 1900 in Pounds Sterling and US Dollars

The doted lines are the unadjusted nominal annual average aluminium price, and the sold lines are the inflation adjusted aluminium price.  The first thing that becomes obvious is that the unadjusted aluminum price was at its lowest in the late 1940s in both US Dollars and Pounds Sterling at approximately $331 and £82 per a metric tonne respectively.  Furthermore before 2010 the nominal price peak occurred in 2006 in both US Dollars and UK Pounds at $2,690 and £1,453 per a metric tonne respectively. 

However when you examine the inflation adjusted aluminium price, you notice that its lowest prices occurred in 2002 in US Dollars at $1,792 and in 2003 in UK Pounds at $1,190 per metric tonne.  These lowers were virtually matched in both currencies happened in 1992, 1999, and 2007.  The pries see in 2010, in both US Dollars and Pounds Sterling are comparably to the inflation adjusted prices through out the 1990s and 2000s.

The historic inflation adjusted aluminium prices in US Dollars and UK Pounds can be more easily seen in the chart below, which only shows the inflation adjusted price on a linear axis (non logarithmic, unlike the first chart).

Historic Inflation Adjusted Aluminum Price since 1900 in US Dollars and Pounds Sterling

The inflation adjusted price of aluminium was flat for the first 5 years of 20^th Century whereupon it rose rapidly and peaked in 1907 at $24,000 and £20,150 per metric tonne.  From this peek it fell steady for the next 10 year, until 1941 were it experienced a sharp rapid increase, which coincided with the First World War (WWI) and fell back to its pre war prices by the 1920s.  The price remained fairly flat thought out the 1920s and 1930s.  There was a substantial decrease in the prices in the early 1940s, however from the late 1940s until the late 1970s the aluminium prises stayed pretty constant between $4,500 to $3,500 and £4,000 to £2,300 per metric tonne.

Using the price in 1900 as a baseline, the inflation adjusted aluminium price in UK Pounds and US Dollars was indexed.  This allows the examination of the relative price changes during this historical period of time more easily and is shown below.

Historical Inflation Adjusted Aluminium Price since 1900 in US Dollars and GB Pounds, Indexed to 1900

The indexed price data clearly displays that the historic inflation adjusted aluminum price has fallen considerably since the 1900s.  Once inflation was accounted for the real price of aluminum by 2000s was approximately a tenth of what they were at the beginning of the 20^th Century.  So from a historical perspective once inflation has been accounted for,  the price of aluminium has virtually never been cheaper.

Written by Inflation Monkey. Join on Google+