Global Commodities A Sound Investment

Cautious investors should put their money in global commodities, analyst claims.

Global commodities remain a good investment opportunity for 2010 on the back of strong growth in 2009, according to Simon Littmoden, vice president, business development, MENA, at JP Morgan Asset Management.

Last year saw the price of copper, zinc, base metals, and aluminium rise by 140 percent, 112 percent,104 percent, and 44 percent, respectively, as a result of growing global demand for commodities coupled with ongoing supply shortages.

This year, demand for commodities is set to continue to increase as emerging economies, such as China, India, Brazil, and Russia (BRIC) buy-up key building materials to meet massive infrastructure plans, fuelled by urban migration.

“Commodities offered strong returns in 2009, and commodity investors can expect to see further opportunities for growth in 2010 as demand continues to outstrip supply,” said Littmoden.

In the last nine years, China’s demand for copper has quadrupled to the point where it now buys up almost 50 percent of the world’s copper supplies – a trend that is predicted to grow in the coming years as China invests billions in the construction of railways, roads, and structures to cater for its 1.3billion population.

Meanwhile, the global recession of 2008 and 2009 has seen investment in the exploration and mining of commodities decline, leading to supply shortages that could last for another decade, until extraction catches up with demand.

“At a time of rising demand for commodities, supply has slowed, mines have been shut and extraction has stopped. When it takes an average of eight years to extract commodities from the ground, after an initial investment in exploration has been made, you can see that the affects of the global recession will last for years to come in terms of commodities,” added Littmoden.