Commodity Super-Cycle and Decline – Page 55

Brics Fade as Engine of Growth – by Bob Davis (Wall Street Journal – January 2, 2013)

January 2, 2013

http://online.wsj.com/home-page

BEIJING—Not too long ago, the Brics nations looked like they might be able to provide a powerful engine of growth for the global economy. Don’t count on it for 2013.

Brics refers to some of the stars of the emerging markets—Brazil, Russia, India, China and South Africa—which together represent 40% of the world’s population. But only one of the nations, China, has the economic heft to make a major difference internationally on its own, and it is just now starting to come out of a slowdown. The other four nations face a variety of economic challenges, ranging from inflation to inadequate foreign investment to labor unrest.

Since 2009, the leaders of the group have held four leaders summits. South Africa, which joined the group at the end of 2010, is hosting the fifth summit in Durban, South Africa, in March 2013. But tThe hope that the Brics countries would help one another through increased trade, investment and political support hasn’t panned out. Officials and analysts from Brics nations say they act as much as rivals as allies, and their lack of cohesion adds to their economic problems.

China complains that other Brics countries increasingly target it in anti-dumping suits. Brazil objects to Moscow’s restrictions on Brazilian agricultural imports. Russia is trying to turn itself into a major farm exporter, which is bound to heighten competition with Brazil. Slower growth in China and India pushes down commodity prices, which hurts South Africa and Russia.

China North: Canada’s resources and China’s Arctic long game – by James Munson (iPolitics.ca – December 31, 2012)

December 31, 2012

http://www.ipolitics.ca/

China’s designs for a greater role in the Arctic could be built on Canadian resources.

Chinese firms have invested over $400 million in northern Canada through various mineral and petroleum projects, while the Chinese government tries to simultaneously edge its way into the region’s key governance body, the Arctic Council.

While most of these deals are small, the resource sector is intiminately linked to the larger policy questions facing Arctic nations, which range from environmental protection to shipping corridors. If China gains influence in Artic affairs in the coming years, the impacts could be felt in Canada’s northern backyard.

“They have demonstrated that they will play hardball politics in terms of their interests,” said Rob Hubert, an associate professor at the University of Calgary who tracks China’s economic and strategic creep into the Arctic.

Ottawa enacted new restrictions on the foreign ownership of oilsands and other sectors in early December, signalling that the Asian powerhouse’s interest aren’t always concurrent with Canada’s.

Yet the two countries are engaged in a “strategic partnership,” an economic relationship that has a don’t-ask, don’t-tell approach to issues with more friction like human rights and foreign policy.

It’s a balancing act in constant evolution and the North — filled with oil, gas and minerals that could one day be feeding Chinese homes — is one place where the relationship could one day get icy.

Why Latin America is a magnet for Canadian businesses – Tavia Grant (Globe and Mail Editorial – December 5, 2012)

December 6, 2012

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

If there is one word that signifies the march of millions of Brazilians out of poverty and into the middle class, it is this: perfume.

Brazil is now the world’s largest fragrance market, and third in the $300-billion-plus global beauty market. Its consumer class, the biggest in the continent, also has a voracious appetite for cellphones, flat-screen TVs and tablet computers.

It’s not just Brazil. A sea change is rippling through Latin America, a region once better known for hyper-inflation, political instability and high poverty rates. In the past decade, 50 million people have joined the middle class, a World Bank study showed last month. The massive shift means the middle class and the poor now account for about the same share of region’s population, at about 30 per cent.

With rising fortunes come shifts in consumption patterns, from needs to wants, from low-priced goods to middle and high-end products such as fridges and cars. It explains why companies are so keen on the region, where Dorel Industries is selling more car seats, Lush Fresh Handmade Cosmetics more soap, Research In Motion more BlackBerrys and Bank of Nova Scotia more mortgages. It’s also where Canada’s biggest public pension manager is pouring investments – into Brazilian shopping malls and Chilean toll roads – a long-term bet this trend will only gather steam.

UPDATE 5-Vale to scale back investment as global economy bites – by Jeb Blount (Reuters U.S. – December 3, 2012)

December 4, 2012

http://www.reuters.com/

RIO DE JANEIRO, Dec 3, 2012 (Reuters) – Brazil’s Vale SA , the world’s second-largest mining company, cut estimated 2013 capital spending by 24 percent after a global slowdown and a drop in iron ore prices led the company to rethink expansion.

The retrenchment comes after sluggish growth in the United States, China and Europe diminished demand for metals and weighed on the price of iron ore, Vale’s main product.

Iron ore , a key ingredient in steel, fell to a three-year low in September, and is currently hovering around $115 a tonne. Vale forecasts a $110-$140 a tonne range in the coming year.

Vale will invest $16.3 billion in 2013, down from the $21.4 billion budgeted this year for new projects, research and development and to maintain existing mines and plants, according to a regulatory filing on Monday.

“The outlook for slower expansion of global demand for minerals and metals in the medium term requires rigid discipline in the allocation of capital and greater focus in maximizing efficiency and reducing costs,” the company said in the statement.

The world’s commodity supercycle is far from dead – by Ambrose Evans-Pritchard (The Telegraph – December 2, 2012)

December 4, 2012

http://www.telegraph.co.uk/

Great resource booms usually end abruptly, catching almost everybody by surprise.

The rhythm is as old as mankind. It is poignantly described Nobel laureate Halldór Laxness through the life of an Icelandic sheep farmer a hundred years ago in Independent People, harrowing because his ruin is so utterly human.

Studies by the World Bank covering two centuries of data sketch a pattern of 10-year supercycles, followed by a slide for the next 20 years or so as excess investment leads to a flood of supply. The long bear market can be cruel for those hanging onto to resource stocks, convinced that the rebound must be nigh.

Mark Ryder, Australian investment chief for UBS, says we are reaching just such an inflexion point as China’s manic construction phase gives way to more sedate growth, and Europe, America, and Japan take their fiscal medicine. “The commodity super cycle’s end is at hand. The scene is set for a momentum shift,” he said.

This view is daily dinner talk in Australia, a country that lives off iron ore and coal sales to China – and described contentiously by Dylan Grice from Societe Generale as “a credit bubble built on a commodity market built on an even bigger Chinese credit bubble”.

Carney on commodities: ‘wrong conclusions … could do a lot of damage’ – by James Munson (iPolitics.ca – Septmeber 19, 2012)

December 4, 2012

http://www.ipolitics.ca/

iPolitics’ James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. Here in Part 1, he explains his view that the resource boom is “unambiguously good” for Canada. Tomorrow, in Part 2, Carney explains the supercycle as part of a larger global economic restructuring. And on Friday, he’ll describe the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

Mark Carney doesn’t think Canada has any control over the resource boom.

The 47-year-old governor of the Bank of Canada, sitting beneath the portraits of his predecessors in the bank’s stately Graham Towers boardroom, says that as China and other emerging economies have fuelled a sustained rush for resources, sometimes called a commodities supercycle, they have redrawn the fortunes of developed countries like Canada.

The supercycle has spurred a massive expansion of the country’s biggest commodity export in the Albertan oilsands, triggered the deregulation of federal environmental assessments, made mining projects in the country’s northern regions viable and – at least according to the official opposition – contributed to the decline of the manufacturing sector.

As politicians have wrestled with this historic new force in the Canadian economy, misunderstandings about its root causes have developed and, left unchallenged, these could prompt bad policy choices.

‘Nature of global growth is shifting,’ and not just for commodities: Carney – by James Munson (Part 2 of 3)(iPolitics.ca – Septmeber 20, 2012)

December 4, 2012

http://www.ipolitics.ca/

iPolitics James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. In Part 1, he explained his view that the resource boom is “unambiguously good” for Canada. Today, in Part 2, Carney explains the supercycle as part of a larger global economic restructuring. And on Friday, he’ll describe the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

Mark Carney keeps changing the subject.

The governor of the Bank of Canada has agreed to an interview to discuss the resource boom – and whether it’s good for Canada – but the conversation keeps turning to the global economic situation.

“The nature of growth globally is shifting,” Carney said. “In our opinion, we need a sustained strategy to really build our penetration of emerging markets and that is well beyond commodities – that is not a commodities statement.”

That’s the trouble with the resource boom, or the commodities supercycle as it’s sometimes called. It can’t be switched off and on to benefit other businesses that may be having a hard time adjusting to the resource sector’s newfound success.

‘Now’s the time to build,’ Carney says; Surprise upsides to an expensive dollar – by James Munson (iPolitics.ca – Septmeber 21, 2012)

December 4, 2012

http://www.ipolitics.ca/

iPolitics James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. In Part 1, he explained his view that the resource boom is “unambiguously good” for Canada. In Part 2, Carney explained the supercycle as part of a larger global economic restructuring. Today, in Part 3, he describes the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

High commodity prices may hurt manufacturers, but they could provide ways to revive the sector and even reasons to go green, said Mark Carney.

The resource boom, sometimes called a commodities supercycle, stems from the rise of emerging economies as the main drivers of global growth and is “unambiguously good” for the country, said the governor of the Bank of Canada in an interview with iPolitics last week.

But while the benefits for the country’s miners and petroleum producers are obvious, Carney’s feel-good conclusion takes into account other opportunities for Canada stemming from the economic momentum of places like China.

“Just because it’s good doesn’t mean it could not be a whole lot better,” said Carney in the interview. “And that gets into questions of how do we maximize the returns, how do we deal with this world that has really been transformed?”

Dutch Disease [Commodity Supercycle] Speech – by Mark Carney – Governor of the Bank of Canada (Calgary, Alberta – September 7, 2012)

December 4, 2012December 4, 2012

Presented to: Spruce Meadows Round Table – Calgary, Alberta (September 7, 2012)

Introduction

Some regard Canada’s wealth of natural resources as a blessing. Others see it as a curse.

The latter look at the global commodity boom and make the grim diagnosis for Canada of “Dutch Disease.”1 They dismiss the enormous benefits, including higher incomes and greater economic security, our bountiful natural resources can provide.

Their argument goes as follows: record-high commodity prices have led to an appreciation of Canada’s exchange rate, which, in turn, is crowding out trade-sensitive sectors, particularly manufacturing. The disease is the notion that an ephemeral boom in one sector causes permanent losses in others, in a dynamic that is net harmful for the Canadian economy.

While the tidiness of the argument is appealing and making commodities the scapegoat is tempting, the diagnosis is overly simplistic and, in the end, wrong. Canada’s economy is much more diverse and much better integrated than the Dutch Disease caricature. Numerous factors influence our currency and, most fundamentally, higher commodity prices are unambiguously good for Canada.

NEWS RELEASE: Elevated Commodity Prices “Unambiguously Good” for Canada, Says Bank of Canada Governor Mark Carney (September 7, 2012)

December 4, 2012

FOR IMMEDIATE RELEASE

7 September 2012
Contact: Jeremy Harrison
613 782-8782

Calgary, Alberta – The global commodities boom drives enormous benefits for Canada, including higher incomes and greater economic security, Bank of Canada Governor Mark Carney said today in a speech to the 2012 Spruce Meadows Changing Fortunes: Global Economies Round Table.

“Most fundamentally, higher commodity prices are unambiguously good for Canada,” Governor Carney told delegates. “The strength of Canada’s resource sector is a reflection of success, not a harbinger of failure.”

The Governor addressed the diagnosis of Dutch Disease for the Canadian economy that suggests an ephemeral commodities boom is causing permanent losses in the manufacturing sector. He countered with three arguments.

First, despite the current strains on global growth, commodity prices are expected to remain elevated, primarily driven by a sustained increase in demand, much of it stemming from the rapid urbanisation of emerging markets.

Supply constraints remain many commodities’ key driver – E&Y – by Dorothy Kosich (Mineweb.com – December 3, 2012)

December 3, 2012

http://www.mineweb.com/

Mining’s demand outlook remains strong, and with the policy-induced soft landing in China, the picture for mining coming into next year is bright—says Ernst & Young.

RENO (MINEWEB) – “The fundamental demand story for mining and metals remains strong and we are already seeing an increase in growth in the Chinese economy, with expectations that this will be maintained in 2012,” says Ernest & Young’s Global Mining & Metals Leader, Mike Elliott.

“While we remain confident in the outlook for demand, we are more concerned about how the current hiatus in new capital approvals will impact future supply,” he added. “Supply constraints remain the key driver for many commodities in the medium to longer term, particularly iron ore, copper and lead.”

“There will need to be higher price signals to attract investment for new supply to meet longer term demand,” he stressed.

In a news release issued today, Elliott suggested the “volatility created by the global economic roller-coaster over the past 12 months, and the cost blowouts in the sector from the rapid expansion in recent years has created a very different operating environment for miners coming in 2013.”

China’s economy on the upswing; world markets climb – by Carolynne Wheeler (Globe and Mail – December 3, 2012)

December 3, 2012

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

BEIJING — Amid European gloom and the looming U.S. fiscal cliff, the Chinese economy appears to be regaining its momentum.

Two separate purchasing managers’ indices ticked up last month: an official state measure released over the weekend reached 50.6, a seven-month high, while a separate tally by HSBC hit a 13-month high, at 50.5.

It’s not often that the two numbers so closely intersect, since one is more heavily weighted toward state-owned enterprises and the other toward the smaller private sector, and suggests the economic winds are changing for China despite external forces.

World stock markets rose Monday on the data. European stocks opened higher. Britain’s FTSE 100 rose 0.4 per cent to 5,892.73. Germany’s DAX added 0.5 per cent to 7,440.67 and France’s CAC-40 advanced 0.5 per cent to 3,575.95.

Wall Street appeared headed for a session of modest gains, with Dow Jones industrial futures rising 0.1 per cent to 13,025 and S&P 500 futures adding 0.1 per cent to 1,416.

“The final November manufacturing PMI stood at a 13-month high of 50.5 on increasing new business and expanding production.

BRICS mining: the lay of the land – by Chris Lo (Mining Technology.com – January 5, 2012)

November 30, 2012

http://www.mining-technology.com/

The so-called BRICS nations (Brazil, Russia, India, China and South Africa) are the world’s emerging powerhouses, in more ways than one. As well as exerting an ever-growing influence on the global political stage, these burgeoning economies are building up an industrial base that is closing the gap with the developed western world – or, in some cases, even surpassing it.

No sector illustrates this process better than mining. Competition from low-cost, large-scale mining projects in the BRICS nations has simply been too much for many European and US operations, which are struggling with higher overhead costs and more complex regulatory regimes. As a consequence, countries such as Brazil and China have become hotbeds for international investment.

BRICS countries look outward

BRICS mining investment, however, isn’t just a one-way street – increasingly, these countries are looking to tap into overseas resources in addition to their own domestic deposits. Indian companies including Adani Mining and Lanco Infratech have been assertively investing in Australian coal mining projects, while Brazilian iron ore giant Vale’s funding of iron ore projects in China proves that there are lucrative opportunities in inter-BRICS investment.

In Africa, BRICS countries, particularly China, are becoming more prevalent as investors in new mining projects, both for profit and to provide materials for massive infrastructure and construction projects.

With China and India Ravenous for Energy, Coal’s Future Seems Assured – by Peter Galuszka (New York Times – November 12, 2012)

November 25, 2012

http://www.nytimes.com/

RICHMOND, Va. — Last summer, nearly half of India’s sweltering population suddenly found the electricity shut off. Air-conditioners whirred to a stop. Refrigerators ceased cooling. The culprits were outmoded power generation stations and a creaky electricity transmission grid.

But another problem stood out. India relies on coal for 55 percent of its electric power and struggles to keep enough on hand.

Coal remains a critical component of the world’s energy supply despite its bad image. In China, demand for coal in 2010 resulted in a traffic jam 75 miles long caused by more than 10,000 trucks carrying supplies from Inner Mongolia. India is increasing coal imports.

So is Europe, as it takes advantage of lower coal prices in the United States. Higher-priced natural gas on the Continent is creating demand for more coal imports from the United States, where coal is taking a drubbing from less expensive natural gas.

Coal may seem an odd contender in a world where promising renewable energy sources like solar, wind and hydroelectric power are attracting attention. Anathema to environmentalists because it creates so much pollution, coal still has the undeniable advantages of being widely available and easy to ship and burn.

What’s holding Ontario back? – by Gordon Nixon and Kevin Lynch (Globe and Mail – November 7, 2012)

November 7, 2012

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Ontario – Northern Ontario, in particular – is rich in natural resources.
Northern development is one of Ontario’s great economic opportunities. With
industrial production surging in developing economies, demand for these
resources is high, and we need to capitalize on opportunities across the
value chain. (Gordon Nixon and Kevin Lynch)

Gordon Nixon, CEO of the Royal Bank of Canada, is chair of Ontario’s Jobs and Prosperity Council. Kevin Lynch, vice-chair of BMO Financial Group, is vice-chair of the council.

The world has changed, and Ontario must adapt or fall behind. Emerging economies are driving a new era of intense global competition. The Internet and information revolution have made the world smaller, entrenching globalization and accelerating the pace of change. Developed economies are mired in the aftermath of the worst financial crisis and global recession since the 1930s, and many of the advantages that underpinned their prosperity have vanished.

Developed economies across the world must reinvent themselves to compete and win in the new global marketplace. Ontario is no exception – the status quo is not an option.