CHAMBER OF MINES'
Mike Teke: "WE NEED TO BUILD INVESTOR CONFIDENCE"
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.