Iron ore may outperform copper on price-ratio analysis: Clyde Russell

This analysis also shows that the iron ore market appears to be more volatile and tends to overshoot to both the top and the bottom of each pricing cycle.

It's apparent now that iron ore's third-quarter slump to a low of $86.70 a tonne, the weakest price in three years, was worse than justified even by the slowing of growth in major buyer China.

At the time iron ore was crashing, Shanghai copper was relatively stable in dollar terms, and iron ore's subsequent rally to current levels around $115 a tonne still leaves plenty of room for the ratio to the copper price to narrow further.

It would take an iron ore surge to above $150 a tonne to bring the ratio back to 60 times, a level historically associated with times when iron ore starts to once again underperform copper.

It's also worth pointing out that just because the ratio has narrowed in the past due to iron ore rallying, this doesn't mean this will necessarily happen again.

It could be that this time copper declines while iron ore remains relatively stable, and certainly there are a few reasons to believe the red metal may struggle.

Rising mine supply in 2013, anecdotes of elevated levels of unreported stockpiles in China and an uneven economic recovery may weigh on copper.

The official China Purchasing Managers' Index, which rose to a seven-month high of 50.6 in November, also shows

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