EVERY student of the commodity market soon learns the industry’s main axiom: “Low prices cure low prices, and high prices cure high prices.”

That’s why commodities are known as a boom-and-bust industry – periods of over-investment lead to gluts and low prices, which trigger under-investment, which ultimately curbs supply and sends prices up.

What many aren’t taught is that this self-evident principle is often misleading, if not completely false. The latest examples are the global nickel and US natural gas markets, where the accepted truth that low prices cure low prices isn’t working out as the axiom claims.