Kudos to the commodity research group over at TD securities for their most recent analysis of the Aluminum market. What struck us most about their analysis, was the inclusion of a “behaviorally adjusted supply” curve. This supply curve, in effect, makes adjustments for those firms, primarily SOE’s, whose production levels are not solely driven by profit motives. I really like this type of analysis as it typifies so many commodity sectors where a variety of non-profit maximizing entities operate whether it be SOE’s or quasi SOE’s,(codelco?), or de-facto SOE’s (anyone operating in South Africa). We might take this a step further however to include any firms beholden to the capital markets for their very survival, because as such their ability and hence willingness to produce is not driven by profit and loss, but rather by their ability to finance operations, think last years shale bust. The sharp down move in oil prices would have indicated to the market that the marginal barrel of production needed to be rationalized. However, what we saw evidenced in the shale market, was a very temporary shut in of production rather than a permanent shaking out of the marginal producers. We posit that the shale landscape in the U.S. would look vastly different today, if producers faced a dry well in the bond markets during 2016. As we have said, the mis-allocation of capital extant in capital markets today not only causes sub-optimal decision making at the investor level but in the real economy as well.