Leaning against the wind: low-price benchmarks for acting anticyclically in the metal markets

  • Peter BuchholzEmail author
  • Friedrich-W. Wellmer
  • Dennis Bastian
  • Maren Liedtke
Original Paper


Real prices for metals seem to have developed at a constant price level over a long period of time, up to 100 years. Based on real prices for 28 metals, using the US Producer Price Index as a deflator, we have defined long-term and short-term low-price benchmarks. The results show that real prices which developed in cycles or reacted to shocks normally returned to a certain floor price, defined as the long-term low-price benchmark in this study. Using long-term low-price benchmarks as a price signal is a useful tool for investors and buyers to act anticyclically between cycles or shocks, either to secure long-term offtake agreements or to farm into new mining assets at a low price. A combined analysis with average real total cash cost data for 11 mineral raw materials supports the low-price benchmark approach and leads to a discussion whether the lessons of the past hold true for the future. We propose that these learning effects still take place and, in consequence, the long-term real price benchmarks may be extrapolated into the next decade. However, it is possible that the cost pressure to retain or obtain the social licence to operate increases to such a degree that technical rationalization cannot keep up with the cost increases. Consequently, the operating costs at mines and the ratio of the established long-term low-price benchmark to the total cash costs are important aspects to monitor.


Real price Cash cost Price cycle Shock Benchmark Farm in Offtake agreement 



This research was conducted with internal funds at the Federal Institute for Geosciences and Natural Resources (BGR, German Geological Survey). The research is part of the Raw Materials Monitoring System at the German Mineral Resources Agency (DERA) at the BGR. DERA was assigned by the Federal Ministry of Economics and Energy (BMWi) in 2013 to build up the monitoring system which was mandated by the German Government through the German coalition agreement of 2013 between the German parties CDU/CSU and SPD.

We would like to thank the reviewers of this paper for their valuable contributions and comments, Dr. Gus Gunn for proof-reading of the English language and helpful comments regarding individual metal markets, and colleagues at the BGR who compiled historic price data over previous decades.


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.German Mineral Resources Agency (DERA) at the Federal Institute for Geosciences and Natural Resources (BGR)BerlinGermany
  2. 2.Neue Sachlichkeit 32HannoverGermany

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