The Prisoner's Dilemma And Carmakers' Profits

  • Managing market volumes and prices of steel with administrative resources proves difficult.
  • A combination of two dilemmas is likely to result in lower steel prices.
  • Car manufacturers stand to benefit from lower raw material prices, but what about other risks?

It is remarkable how telling prices in multiple commodity markets can be. Often, those markets are parts of the same supply chain or linked to several complementary or substitute products. Reading commodity prices in this connected manner yields insights into the strength of downstream industries and can be a basis for an investment strategy with competitive advantage over the market.
One little snag is, of course, the fact that markets are driven not only by the fundamental supply and demand for commodities, but also by liquidity, storage (if applicable), investment or speculation demand. Additional effort should be applied, then, to separate the wheat from the chaff.
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