TradeTech reports a variety of buyers are now active, including producers, utilities, traders, intermediaries and, notably, investors; recall, speculators played a key role in pushing spot prices to US$138/lb in Jun?2007. On the supply side, several major producers reported lower than expected outputs or reduced guidance in recent weeks. Media reports state the Kazakh Ministry of Industry and Trade cut its 2010E production forecast by 2.3%, or ~1 Mlbs, to 45.7 Mlbs. The change is equivalent to only 0.7% of our 2010E global mine supply forecast; importantly however, we suspect the revision may reflect recognition of the high cost of incremental production (rather than altruistic discipline) and could signal a changing tide for top producer Kazakhstan, where production has grown 198% over the past four years.

David Fuller's view This makes sense but I think there are also other factors at work. The debasement of fiat currencies, not least the US dollar, makes investors increasingly aware that scarce or costly-to-produce resources, for which demand will almost certainly increase, can be attractive investments. These investors, who will include many Fullermoney subscribers, are also aware of the spike in rare earths metal prices following China's reduction in exports.

This lesson will not be lost on the producers of other strategic resources, especially where they are controlled by authoritarian regimes rather than corporate management. Might palladium be next, uranium or even crude oil? Stranger things have happened.