Bottom nears as China lays foundations for future bull run, says Mohr – by Simon Rees (MiningWeekly.com – November 19, 2013)

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TORONTO (miningweekly.com) – Scotiabank believes the bottom for key base metals commodities is approaching, although 2014 and 2015 are likely to remain lacklustre, Scotiabank’s VP economics and commodity market specialist Patricia Mohr told delegates at the Mine Latin America conference last week.

“I think we’re approaching the bottom in this cycle … I’m hoping that we’ll see the bottom for some of the key base metals in early 2014,” Mohr said.

“I think it’s fair to say that the next two years are likely [to present] quite lacklustre conditions for many of the key base metals,” she added. “But I think the bull run in base metal prices will probably return in the second half of the decade.”

WATCHING THE WHEELS

Mohr stressed the importance of China. “As an economist, I now spend more time looking at the outlook for China than I do for the USA,” she said.

“[In] September and October, China’s official PMI [Purchasing Managers Index] has ticked up again and is looking reasonably strong … Despite concern in financial markets, in New York and London, actual demand for base metals and iron-ore in China this year has been quite solid,” she added.

Chinese growth is expected to reach 7.7% for the 2013. “[And] remember that this is occurring off quite a high base of economic activity, so this means a lot for demand for base metals,” she said. “We show it technically slowing a bit next year [sliding] to 7.3% … But I wouldn’t be surprised to see it doing a bit better [than that].”

“A subtle shift in China is under way,” she noted. “They are no longer determined to have economic growth at any cost; they want economic growth which meets their objectives.”

The country’s new leadership has successfully taken over the mantle of power and will seek to stamp its mark on China’s direction, evolving its socialist market economy. “Going forward, we think there’s going to be more emphasis on more market-related solutions for China’s economy,” Mohr said.

She also underlined the importance of the new leadership group, which is likely to include China’s President, Xi Jinping, and will seek to develop further reform plans and skirt around vested interests. “[There’s] a lot of interest in seeing the role of State-owned enterprises [SOEs] move down in importance with the private sector coming up. Personally, I think we will have to wait and see,” she said.

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