Just a blip
BILLIONS OF US DOLLARS have been sliced off mining capital programmes and wide swathes of the industry can’t make money. But don’t worry; it’s a blip. That was the somewhat hopeful tone of this year’s annual mining talk shop – the Mining Indaba – held in a sun-resplendent Cape Town though market clouds hung low.
Around 1 000 fewer people turned up this year, doubtless having had their travel budgets whipped from beneath them. But market analysts urged perspective. “This difficult phase will pass,” says Kevin Norrish, a commodities analyst at Barclays Capital. “In my view we’re still in a bull market for metals. It’s as though a bucket of cold water has been thrown over the industry and it’s gasping for air.”
Gasping is no exaggeration. Barclays Capital says 60% of the world copper market can’t provide a satisfactory return for its shareholders. It’s worse in other industrial metals markets: for example, aluminium is virtually unprofitable worldwide. And more than US$30bn in spending has been stopped.
But the optimism is based on two factors: first, that the world remains resources-constrained, meaning there’s not enough metals to go around. Second, not much new metal has been found in the earth.
The message is that mining is hurting, like the rest of the market, but actually we’re different. “Around 15m to 20m people will urbanise this year, so demand for commodities will continue,” says Norrish.
But it wasn’t just Barclays Capital that was optimistic. Eccentric but enormously respected diamond market analyst Chaim Even-Zohar reasoned the expected 15% fall in global retail diamond sales was “not that bad”. And retail demand would surge back. “People still make sex and get married,” he quipped, referring to the ceremonial and, dare one say, erogenous quality that we’re told a diamond carries.
In Even-Zohar’s view, what’s required is a change in the way the diamond industry is structured. While retail diamond sales – with 50% being in the United States – would