Economics of Metal Markets

Tilton, J.E. (1984). Economics of Metal Markets. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-84-034

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Abstract

Simple economic principles can provide useful insights into the behavior of metal markets. In applying these principles, however, the analyst must take into account technology, market structure, government policies, and other institutional factors influencing the nature of metal supply and demand. Knowledge of both economics and the metal markets is essential. One without the other is likely to lead to sterile or even misleading results.

In support of the above conclusion, this study examines the nature of metal supply and demand in the immediate run (when output is fixed), in the short run (when capacity is fixed), in the long run (when technology and known deposits are fixed), and in the very long run (when nothing is fixed).

The first section considers how a metal's own price, the prices of substitutes and complements, income, and other factors determine its demand. Metal demand functions, demand curves, and demand elasticities are investigated.

The second section focuses on metal supply. It contrasts the nature of supply for metals mined as individual and main products, recovered as byproducts and coproducts, and recycled from old and new scrap.

The third and final section applies the concepts introduced in the first two sections. It analyzes the causes and consequences of the instability that plagues metal markets, the impact of public stockpiling on metal markets, and the conditions needed to use the "incentive price" technique to forecast long run metal prices.

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