Finweek English Edition - - FRONT PAGE - By DAVID MCKAY


If any­one was har­bour­ing hopes that the global min­ing in­dus­try would begin to re­cover from its three-year melt­down this year, then the first few weeks of Jan­uary con­vinced them oth­er­wise.

Last year was a sober­ing year for the min­ing sec­tor characterised by aus­ter­ity c uts , write- downs, r et r ench­ments, re­fi­nanc­ings and prom­ises of bet­ter things to come. CEOs and man­age­ment had heard the call of in­vestors. It was time for pay-back af­ter years of chas­ing vol­ume over sub­stance.

Then on, 15 Jan­uary, the price of cop­per col­lapsed 16%, a par­tic­u­larly alarm­ing devel­op­ment since the red metal was, of all met­als, con­sid­ered to have the most ro­bust of prospects, es­pe­cially in China where a medium-term sup­ply deficit un­der­pinned con­fi­dence.

Com­ing off the slide in crude oil to half its $99 per bar­rel av­er­age of 2014, it now ap­peared that no metal was sacro­sanct. One of the cat­a­lysts ap­peared to be an ad­just­ment by the World Bank on 13 Jan­uary that global eco­nomic growth would be 3% in 2015 rather than the 3.4% which it had ear­lier fore­cast.

In­ter­est­ingly, much of t he sel l i ng pres­sure in cop­per orig­i­nated in China. This is a fas­ci­nat­ing devel­op­ment be­cause it sug­gests j ust how fa r t he world ’s min­ing econ­omy re­lies on both Chi­nese con­sump­tion and Chi­nese in­vest­ment ap­petite.

“Un­der­stand­ing Chi­nese mar­ket sen­ti­ment has never been as im­por­tant in de­ter­min­ing com­mod­ity moves,” said Mac­quarie Re­search in a 7 Jan­uary re­port. “Never be­fore in mea­sured his­tory has a sin­gle econ­omy been as im­por­tant for both cur­rent con­sump­tion and con­sump­tion growth on a five-year view.”

If Mac­quarie is right – and no- one dis­agrees with the role played by China in the com­modi­ties sec­tor – then news that China’s eco­nomic growth would slow to around 7% this year, from dou­ble-digit growth in 2010, is the cor­ner­stone fact you need to know about the prospects for min­ing in­vest­ment in 2015.

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