Metals' Price Elasticity of Normalized Excess Supply

We extend the model of Bashiri and Lawryshyn (2018) to the metals market and measure the significance of the relationship between metals' prices and normalized excess supply. We utilize Commodity Exchange prices, the World Bureau of Metal Statistics production and consumption data, as well as inventory data from the London Metal Exchange, Commodity Exchange, and Shanghai Futures Exchange from 1997 to 2017. We find significant relationships for copper, nickel, zinc, lead, and tin, while aluminum exhibits no relationship due to deficient inventory data. We find that during certain intervals of the 2009-2011 period, there exist deviations from the long-term relationship for the metals' prices possibly due to speculation, financialization, price stickiness, and increase of liquidity as a result of central banks' quantitative easing programs