KALGOORLIE, Australia: Commodity prices may extend their rally in 2010 as the global recession abates, said Nouriel Roubini, the New York University economist who predicted the financial crisis.
"As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year," Roubini said yesterday at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. "There is now potentially light at the end of the tunnel."
Roubini, chairman of Roubini Global Economics and a professor at NYU's Stern School of Business, joins former Federal Reserve Chairman Alan Greenspan in seeing signs of recovery. Commodity prices gained the most in more than four months on July 30 as investors speculated that the worst of the global recession has passed and consumption of crops, metals and fuel will rebound.
"The things he was saying provide good indicators for our business," Martin McDermott, a manager for metals project development at SNC-Lavalin Group Inc, Canada's biggest engineering and construction company, said at the conference. "The commodities that we're involved with, being copper, nickel, gold, iron ore, all seem to have positive signs and we hope to take advantage of that."
Greenspan said on Sunday the most severe recession in the US in at least five decades may be ending and growth may resume at a rate faster than most economists foresee. Oil has jumped 56 percent in 2009 and copper has surged 86 percent.
Roubini predicted on July 23 that the global economy will begin recovering near the end of 2009, before possibly dropping back into a recession by late 2010 or 2011 because of rising government debt, higher oil prices and a lack of job growth.
Economic growth in China, the world's biggest metals consumer, accelerated in the second quarter, gaining 7.9 percent from a year earlier. China, the biggest contributor to global growth, overtook Japan as the world's second-largest stock market by value on July 16 after the nation's 4 trillion yuan ($585 billion) stimulus package spurred record lending and boosted prices of shares and commodities.
China will meet its target of 8 percent growth in gross domestic product this year, Roubini said. Manufacturing in China climbed for a fifth month in July as stimulus spending and subsidies for consumer purchases countered a collapse in exports, and helped companies from chipmaker Semiconductor Manufacturing International Corp to automaker General Motors Corp as well as mining companies such as BHP Billiton Ltd and Rio Tinto Group.
The price of aluminum, used in beverage cans and airplane parts, has declined by a third in the past year as the global recession crimped demand. A recovery in demand may be offset by the "huge amount of excess capacity," which could be a risk to the price, Roubini said.
The Reuters/Jefferies CRB Index of 19 commodities has risen 12 percent this year. It jumped 3.9 percent on July 30 to 253.14, the biggest gain since March 19.