“The world just cannot handle such high prices. It looks unrealistic. If economies are starting to slow down, finances are getting stretched and banks are writing off losses, the high commodity prices are unsustainable. For prices to stay so high, they will all need financial firepower [sustain] them,” he added.

He said that even though stock markets initially ran on hype or rumour, they actually ran on earnings, which push prices up.

He further noted, “What are driving commodities are people. If you don’t have people, you don’t have demand for commodities, and it’s not just the numbers of people, but the aspirations of people. “You can keep the population the same, but the aspirations keep growing, which also translates into demand for our commodities.”

He remarked that all the commodities had had their turn to spike in the last few years. “For example, sulphuric acid, which was public enemy number one, has gone up 600% in less than ten months. “Agriculture prices are going up, but, in retrospect, they have gone up [less than] all other commodities,” he said.

The commodities sector was worth over $6,5-trillion. Almost $5-trillion came from energy, $1,4-trillion from ferrous metals, $300-billion from base metals, and $110-billion from precious metals. South Africa was the leader in many of these, with 80% of platinum-group metals, 60% of ferrochrome, 30% of ferromanganese and 10% of gold and diamonds.

With the world population growing at about 1,6%, Major noted that, compared with the annual percentage growth of commodities, there is a much larger demand. In 2007, aluminium grew by 6,3%, copper by 3,1%, nickel by 3,5%, zinc by 4,1%, iron-ore by 8,6%, metallurgical coal by 2,3%, thermal coal by 8%, steel by 6,8%, ferrochrome by 6,8% and platinum by 3,4%.

“There are huge growth rates. Is it any wonder prices are going up?” he asked.

He noted that because the dollar was so weak commodity prices also rose.

He noted that, for investment, timing was everything, and that investors should look into what they were going to do with their investments. Investors should add up all the facts and look at the environment they were in, but “if history is anything to go by, it is time to batten down the hatches”.

For ten years, from 1994, the All Share Index averaged at 10% a year, which included dividents in rand terms. In the last four years, the market averaged 38% a year.

“The long-term average has been 19% a year, but my guess is that it is going to be somewhere below the long-term average to make up for the few years of good times that we have had,” he noted.

He said that cost inflation for South African mining companies was also rising.

“I will be surprised if anyone sees inflation below 15%. I think there will be a lot more mining companies over 20% than we’d like to see,” he added.

Concluding, Major said, “The best cure for high prices are high prices. People complain about the high oil price, but the best way to cure it is to shove it up even more. The faster it goes up, the faster people will turn to alternatives. We will see that in all these commodities. We do not need to do anything, these prices will drive themselves down.”

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