april08_simonhunt

8/13/2019 April08_SimonHunt

1/34

A FIVE-YEAR FORECAST

OF GLOBAL CONSUMPTION:

FACT OR FANTASY

by

Simon Hunt CEO

Simon Hunt Strategic Services

for ICSG Meeting in Lisbon

on 24th April, 2008


2/34

Presentation Divided into 4 Parts

Economic Background Production

Consumption

Price Outlook


3/34

Taken together with possible decl ines in theprices of many assets from unusually elevated

levels, and the risk o f a sharp rise in household

savings rates from unusually low levels in many

countries, the potential for a substantial impact

on g lobal econom ic act iv i ty should no t beunder-estimated. Just as the real and financ ial

sectors interacted on the way up, so they migh t

wel l do so on the way back down.

William R White, Economic Advisor and

Head of Monetary and Economic Department

of the bank for International Settlements, Basle,

Switzerland


4/34

Mean Reverting Dynamics

of Net Worth


5/34

US Real Average Weekly Earnings

Source: www.shadows.com


6/34

Consumer Inflation in the American

Colonies



7/34

US Money Supply M3



8/34

More Money, Less Wealth


9/34

J P Morgan Global PMI Index

50

51

52

53

54

55

56

57

58

59

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08


10/34

NFIB Optimism Index


11/34

Leading indicators


12/34

Financial and sentiment indicators


13/34

Japans LEI has turned down

Turning Points at End of Decades


14/34

Turning Points at End of Decades

US Industrial Production Index

?2009 2012

-3.699.92001

103.62000

68.51991 -1.369.41990

56.21980 -7.8

57.7197941.91970

-3.2%43.31969

26.11961 Flat

26.01960

% ChangeIndex


15/34

30 Year Berry Cycle

25

30

35

40

45

50

55

60

65

70

75

80

Jul-46

Jul-47

Jul-48

Jul-49

Jul-50

Jul-51

Jul-52

Jul-53

Jul-54

Jul-55

Jul-56

Jul-57

Jul-58

Jul-59

Jul-60

Jul-61

Jul-62

Jul-63

Jul-64

Jul-65

Jul-66

Jul-67

Jul-68

Jul-69

Jul-70

Jul-71

Jul-72

Jul-73

Jul-74

Jul-75

Jul-76

Jul-77

Jul-78

Jul-79

Jul-80

Previous cycle

Indexlevel(July1946toMay1980)

30

34

38

42

46

50

54

58

62

66

70

74May-80

May-81

May-82

May-83

May-84

May-85

May-86

May-87

May-88

May-89

May-90

May-91

May-92

May-93

May-94

May-95

May-96

May-97

May-98

May-99

May-00

May-01

May-02

May-03

May-04

May-05

May-06

May-07

May-08

May-09

Current cycle

Indexlevel(May1980todate)

Jul 46 to May 80 (6-mth av., l.h.scale, lower time axis)

May 80 to date (Monthly, r.h.scale, upper time axis)

ISM Purchasing Managers Index(Monthly, seasonally adjusted)

Data source: Institute for Supply Management

InnovationIncubation/Transition Absorption/Consolidation

Final 30-year

cycle peak

Source: Tony Plummer


16/34

Market Cycle Review

Tony Plummer


17/34

The Kondratieff Wave


18/34

US & World GDP 2007-2015

% Change Per Year

4.03.53.01.5-0.51.02.03.03.6WORLD

3.02.51.00.0-0.5-2.0-1.00.5-1.02.2USA

201520142013201220112010200920082007


19/34

Copper


20/34

Asias Consumption


21/34

East-West Index

Source: Lloyd George Management


22/34

Asias Copper Consumption

Kt-cu

3480279027302698309826142271Ex China, Japan

10920939690208620831376465406Total Asia

2015201020092008200720062000


23/34

China


24/34

Chinas Intensity of Use (ITU)Real GDP/Refined Consumption

Average

0.692004-2006

1.452000-2006

1.031990s

C f C


25/34

Chinas Refined Consumption

by Sector Kt-cu

52755030461043503750Total

140130130130110Rest

14001350130012181050Consumer Goods

305290275260225Industrial Equipment

26002200190016531430Infrastructure

830770780826710Construction

20102009200820072006


26/34

1. Illogical Consumption Growth Rates

Being Used

2. How China & India will NOT Save the

World

3. What Actually Do We Mean by

Consumption?

Global Trends

World Trend Growth Rate


27/34

World Trend Growth RateRefined Copper Consumption 1960 - 2006

2.7%2000 2006

2.7%1990s

1.2%1980s

3.5%1970s

4.8%1960s

% Change Per Year

Source: ICSG


28/34

World Intensity of Use (Using GDP)

0.722000-2006

1.041990s

0.161980s

0.971970s

0.851960s


29/34

Old World versus China+India:Share of Global Consumption

34%33%25%14%China + India

33%36%44%58%Old World

2015201020062000


30/34

China 2007 Copper Balance Kt-cu

518818Balance

13681368Net Imports

43503991Refined Consumption35003441Refined Production

SHSSNBS


31/34

Forecasts


32/34

Substitution Cumulative Annual Losses

2006 2012 Kt-cu

1700160015001000600400150

2012201120102009200820072006


33/34

Three Forecasts for World RefinedCopper Consumption

1. Mechanical

2. Trend Growth less Substitution

3. SHSS GDP Forecast less Substitution


34/34

Forecasts of Refined Consumption

2007 2012% Change Per Year

Method 1 1.6%

Method 2 1.2%

Method 3 -1.0%

april08_simonhunt

Documents