Investors must pay greater attention to industry supply, particularly when the global bull market is at or near its end and global growth is close to peaking. Owning the number three or four player in an oversupplied industry can be a portfolio killer.
Market commentators and analysts tend to focus much more on demand: we hear a lot about Asia’s middle-class consumption boom and what it means for minerals demand; or Australia’s population boom and housing demand. Far less considered is the supply of those resources.
Also, economists focus on supply mostly as a price determinant: all things equal, greater supply of a product or service when demand is constant leads to lower prices.