Banks struggle to adapt or survive in commodities – by Dmitry Zhdannikov (Reuters U.S. – November 5, 2012)

http://www.reuters.com/

LONDON – (Reuters) – Stick, twist or fold? Like card players, the top five banks in global commodities trade have reached the point where they must decide to hold strategy, adapt, or give up and get out.

The boom in resource markets that started 10 years ago attracted many big banks to trade oil, metals and agriculture, but the 2008 financial crisis forced a painful retreat and tighter regulation now means some banks may throw in the towel.

Decisions rest on whether the banks believe their business models can be changed to keep them sufficiently profitable under the rising oversight of regulators, after four years when their revenue from commodities was halved.

“The total wallet back at the peak was about $14 billion for the banking sector in commodities trading. I’d imagine this year it’ll be about $7 billion. There were 10-14 banks when it was at $14 billion, now there are really five relevant ones,” said David Silbert, who leads commodities trading at Deutsche Bank.

Deutsche, together with Barclays and J.P. Morgan, broke into the commodities arena in the last decade with acquisitions or aggressive growth to challenge established veterans Goldman Sachs and Morgan Stanley.

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Australia in the Asian Century White Paper (October 2012)

Executive Summary

Asia’s rise is changing the world. This is a defining feature of the 21st century—the  Asian century. These developments have profound implications for people everywhere.

Asia’s extraordinary ascent has already changed the Australian economy, society and strategic environment. The scale and pace of the change still to come mean Australia is entering a truly transformative period in our history.

Within only a few years, Asia will not only be the world’s largest producer of goods and services, it will also be the world’s largest consumer of them. It is already the most populous region in the world. In the future, it will also be home to the majority of the world’s middle class.

The Asian century is an Australian opportunity. As the global centre of gravity shifts to our region, the tyranny of distance is being replaced by the prospects of proximity. Australia is located in the right place at the right time—in the Asian region in the Asian century.

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Understanding commodity super-cycles – by Van’t Veld (Troy Media – May 15, 2012)

http://www.troymedia.com/

Will Van’t Veld is an economist with ATB Financial.

Why they start and why they end

EDMONTON, AB, May. 15, 2012/ Troy Media/ – Canada’s political and business leaders obviously think we’re at the front-end of a commodity super-cycle and they’re trying to put in place policies and infrastructure so that Canada can take full advantage. But what exactly is a commodity super-cycle?

Capitalism is incredibly efficient at producing wealth, but unfortunately society hasn’t figured out how to keep every expansion phase from ending in an unpleasant contraction phase. This is the business cycle and there may be multiple business cycles that occur within each commodity super-cycle.

How does a super-cycle begin . . . and end? A commodity super-cycle occurs over multiple decades during which the rise in commodity prices is observed across the board, before declining for a long period. This is the definition given by economists Bilge Erten and Jose Ocampo, who wrote an interesting working paper on the topic for the United Nations Department of Economic and Social Affairs entitled, Super-cycles of commodity prices since the mid-19th century.

Of interest here is what gets the commodity super-cycle going and why it ends. According to Erten and Ocampo, it’s a rapid shock to demand that starts the cycle.

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The way the nation lives: Canada bets its buck on commodities – by James Munson (iPolitics – October 2012)

 iPolitics is independent, non-partisan and committed to providing timely, relevant, insightful content to those whose professional or personal interests require that they stay on top of political developments in Ottawa and the provinces.

RepublicOfMining graciously thanks iPolitics deputy editor Ian Shelton and writer James Munson for allowing this very insightful and timely content to be posted on this Blog – Stan Sudol

Commodity Supercycles

Speaking on the phone from Haifa, Israel last month, Natural Resources Minister Joe Oliver didn’t hide his government’s bout of commodities fever.

“As I’ve mentioned before, Canada is undertaking many major mega projects,” said Oliver, who was in Israel to secure energy partnerships with the Jewish state. “Over the next 10 years, we could see 500 projects with half a trillion dollars at stake.”

“No other country in the world is undertaking energy and mining projects at this scale or at this pace, creating a truly once in a generation opportunity for investors,” he said.

He was echoing his boss, Prime Minister Stephen Harper, who used the Summit of the Americas in Cartagena, Columbia in April to expound at resource development’s “vast power to change the way a nation lives.”

“Our natural resource sector is of vital importance in ensuring solid job creation and economic growth in Canada,” he said a month after putting forth a budget that deregulated much of Ottawa’s oversight over resource projects, a move that will heighten energy and mining’s already important stature in the Canadian economic pantheon.

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How to become better hewers of wood and drawers of water – by James Munson (iPolitics.com – October 9, 2012)

http://www.ipolitics.ca/

Outside advice keeps pouring in as Canada tiptoes closer to becoming a commodity economy, and nothing has provided such a wide-ranging shake-up as a report released this week by the Canadian International Council.

A carbon tax, more provincial sovereign wealth funds, looser foreign investment restrictions and fewer temporary foreign workers are just some of the policies inside The 9 Habits of Highly Effective Resource Economies, a report released by the CIC Tuesday.

The report’s author Madelaine Drohan looked around the world at how countries govern their resources and posed the question: how can Canada better manage its natural resource wealth?

“There was no perfect model,” said Drohan, who spoke to over 160 people during a five-month break from her day job as a Canadian contributor to The Economist to find the answer. But she said she did find worldwide trends in resource governance that Canada, despite having many isolated policies related to resources, ignores at its peril.

“We like to put things in discrete silos and you can’t really do that with resources because there’s political and social (issues),” said Drohan. “This doesn’t just involve the Natural Resource Department. It involves Foreign Affairs and Environment and the Finance Department.”

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The 9 Habits of Highly Effective Resource Economies: Lessons for Canada – by Madelaine Drohan (Canadian International Council Policy Report – October 5, 2012)

Madelaine Drohan is the Canada correspondent for The Economist and contributes regularly to its sister company, the Economist Intelligence Unit. For the last 35 years, she has covered business and politics in Canada, Europe, Africa and Asia. She has written in the past for The Financial Times (UK), appeared as a commentator on BBC Radio (UK), ABC Radio (Australia) and CBC Radio, and worked in Canada for The Globe and Mail, The Financial Post, Maclean’s, and The Canadian Press.

For the entire report click here: The 9 Habits of Highly Effective Resource Economies: Lessons for Canada

Executive Summary

Hewers of wood and drawers of water have had a bad image since Joshua cursed the Gibeonites and condemned them to those labours. Some of that biblical taint lingers in Canada. Fur, fish, wood, and minerals may have shaped this country, but for much of the 20th century, natural resources were largely regarded as part of the old economy, best left behind as Canada raced toward a glittery high-tech future.

That future did not arrive. Instead, the global commodity boom that began in 2003, fuelled by industrialization and urbanization in emerging economies, made the resource sectors important again.

Last year, the top Canadian merchandise export to every one of its major trading partners was a natural resource. This unexpected revival of the resource economy is one reason governments in Canada have come late to the realization that they must be more deliberate and united in their approach to resource development if they are to spread the wealth, not just over regions but also over generations.

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Resources: The flashpoint of 2015’s election – by John Ibbitson (Globe and Mail – October 8, 2012)

The 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.

The federal election of 1988 was so important that both sides agreed the very future of the country was at stake. The federal election of 2015 could be of similar nature. Then, the issue was trade. This time it could be resources.

The government and the opposition are dividing, with increasing bitterness, over whether and how Canada should exploit its resource wealth – especially petroleum. The question encompasses jobs, the environment, international relations, and regional growth and decline.

“The real issue is the vision of the future economically and environmentally,” NDP natural resources critic Peter Julian said in an interview. “These are the kinds of issues that will be front and centre in the next campaign.”

Twenty-five years ago last Thursday, as many have noted, Canada and the United States signed a free-trade agreement. But the country was bitterly divided over that issue, as well, ultimately forcing Brian Mulroney’s Progressive Conservative government to call – and win – an election.

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A nine-step plan to fix Canada’s resource economy – by Barrie McKenna (Globe and Mail – October 6, 2012)

The 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.

OTTAWA — Canada will never be a true resource superpower until it shuns “rip-and-ship” extraction, embraces sustainability and shares the wealth with future generations.

Those are among the key conclusions of a provocative new report by the Canadian International Council, entitled “Nine Habits of Highly Effective Resource Economies.” Canada has won the “geological lottery,” with vast stores of resources that the world craves, but it risks squandering that inheritance because it lacks a clear national plan to exploit them wisely, the CIC says.

The foreign affairs think tank points to Norway, Sweden, Finland and Australia as the best examples of countries successfully leveraging their resources for maximum economic and social benefit.

“Other resource producers do a better job of collaborating, of finding a balance between environmental protection and the economy, of adding, building, or extracting value from their resources, of saving for future generations, and of being strategic about resource development,” according to the report, written by Madelaine Drohan, The Economist’s Canadian correspondent and former Globe and Mail reporter. “There are smaller countries with fewer resources than Canada that punch far above their weight on the global stage.”

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Commodities Investors Adjust to a Less-Steady China – by Carolyn Cui (Wall Street Journal – October 3, 2012)

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

For years, commodities investors had it easy–just buy anything that China was buying. Now, with China’s growth slowing and demand for raw materials easing, investors are being forced to work a bit harder.

Some investors have turned away from commodities that are heavily dependent on Chinese demand, such as base metals, cotton and soybeans. Others are searching for areas that will continue to grow no matter what happens in China, such as the U.S. natural gas market. And some are simply getting out of commodities completely.

These moves mark a significant change in the commodities market. China’s seemingly insatiable appetite for raw materials was a crucial driver behind the commodities boom of the past decade, propelling enormous price gains for everything from crude oil to cotton. Now, investors have to figure out which commodities are most vulnerable as the world’s second-largest economy shifts down a gear.

“The strategy of simply buying what China needs is no longer valid,” said Na Liu, a China strategy advisor to Scotia Capital and founder of CNC Asset Management Ltd.

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China denies it is “gobbling up” India’s iron ore – by Shivom Seth (September 24, 2012)

www.mineweb.com

An exhaustive report into illegal mining in the Indian state of Goa has also accused China of using up all of India’s iron ore reserves.

MUMBAI (MINEWEB) – The China Iron and Steel Association has rejected assertions that it is to blame for “gobbling up India’s iron ore reserves” while, at the same time strategically choosing not to mine its own deposits of the metal.

The charges were laid at the feet of the Asian giant by a report into illegal iron ore mining in Goa by the Justice M.B. Shah Committee. The report, which pegged Goa’s mining scam at nearly $6.5 billion, also noted that “China had strategically stopped short of tapping its deposits of 200 billion tonnes”…and suggested that the “Central government should consider banning exports of Indian ore.”

It added, “Planning and conservation of iron ore for at least 50 years is required for Goa so that future generations may not be required to import entire steel from China and likewise countries.”

The report added that while India was exporting ore to China, China was exporting steel back to India and had stopped tapping its domestic deposits. “It would not be out of context to state here that China…prefers to import from countries like India and others.

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Huge potential in China deal – by John Ivison (National Post – September 25, 2012)

The National Post is Canada’s second largest national paper.

Four in 10 Canadians see China as a threat, if opinion polls are to be believed. Seven in 10 oppose approval of the $15.1-billion bid by China’s CNOOC for Calgary oil company, Nexen.

For a prime minister in need of a bump in his approval ratings, it must be tempting to go for the political sugar by nixing the Nexen deal. This was clearly the fear of China’s ambassador in Ottawa, Zhang Junsai, who is urging that the deal be judged solely on business terms. “If we politicize this, we can’t do business,” he told the Globe and Mail.

But for the Harper government to bow to its baser political instincts would be to put short-term political self-interest ahead of the long-term prosperity of the country. There appear to be no reasons of any substance to blow up the transaction.

The Industry department is weighing whether the Nexen purchase is of “net benefit” to Canada. This is pretty simple arithmetic, given the 66% premium CNOOC is willing to pay Nexen’s shareholders. Much of that money will be re-invested in the Canadian economy – a net benefit by any measure.

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NEWS RELEASE: GE Launches Global Mining Business Unit

• Geoff Knox named CEO of GE Mining
• Showcases technologies designed to address environmental challenges, bringing efficient, high productivity and low emission equipment to the industry
• Follows recent and planned acquisitions of Fairchild International and Industrea Limited

LAS VEGAS, NV (Sept. 24, 2012) – GE Transportation (NYSE: GE) today unveiled its newest business unit, GE Mining, that will be headquartered in Brisbane, Australia. The announcement was made at MINExpo 2012 by Geoff Knox, CEO of GE Mining.

The Company recently acquired Fairchild International, which manufactures underground mining equipment, and is finalizing the acquisition of Australian-based Industrea Limited (ASX: IDL, OTCQX: IULTY), a provider of safety and productivity-enhancing mining equipment and services. GE will reach a global customer base with enhanced products based on its clean propulsion systems, energy storage offering and world-class system integration capabilities.

As the global mining industry expands to deeper, more remote and extreme locations, its challenges grow more complex. GE’s portfolio of products and services are uniquely positioned to maximize resources, drive efficiencies and help make the world work better, allowing mines to:

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Africa next: The quest for Africa’s riches – by Geoffrey York (Globe and Mail – September 24, 2012)

The 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.

LUBUMBASHI, DEMOCRATIC REPUBLIC OF THE CONGO – Driving north in Africa’s copper belt, Mark Crandon marvels at the new factories and offices along the highway. “It’s crazy,” he says. “None of this was here three weeks ago.”

upermarkets and shopping malls are opening too. They’re fresh fuel for his theory that anyone can make money in this corner of Africa. “You could almost blindly open any business here and it would be a success,” he says . There’s just no competition.”

It’s an unlikely place for a foreign investor to be raving about. The Democratic Republic of the Congo is one of the world’s most corrupt, impoverished and war-torn countries. Millions have died in the military and political chaos of recent years. Yet even here, the lure of the Africa boom is proving irresistible.

In the copper-belt city of Lubumbashi, the nouveaux riches of the mining industry can be spotted at upscale businesses such as La Plage – a glitzy suburban mall with a gelato shop, high-priced supermarket and cafés, not to mention a swimming pool and an artificial sand beach with parasols and volleyball nets.

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What the rise of Asia means for Canadians – by John Ibbitson (Globe and Mail – September 24, 2012)

The 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.

OTTAWA — When Canadian, Asian and American leaders and thinkers meet in Ottawa this week to discuss this country’s place in the new Pacific century, many in the room will not like what they hear. Global leadership is pivoting from the West to the East faster than anyone could have imagined. Canada’s future – and your job – hinge on pivoting with it.

“Canada has been obsessed with the United States and Europe for the past 200 years. Now, frankly it has got to shift its focus to Asia,” Kishore Mahbubani said. The Singaporean academic, who is recognized globally for his writings on the Asian renaissance, is speaking at the conference, organized by the Canadian Council of Chief Executives.

Such a shift “requires a major psychological reorientation on the part of Canadian minds,” Mr. Mahbubani observed. “But if they don’t wake up, they’ll be left behind.”

The conference takes place in the wake of a proposal, reported in Saturday’s Globe and Mail, from Chinese ambassador Zhang Junsai that Beijing and Ottawa begin work on a free-trade agreement.

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Canada’s Mining Sector: A Global Powerhouse Contributing to the Country’s Prosperous Future – by Pierre Gratton

Pierre Gratton is President and CEO of the Mining Association of Canada (MAC). This speech was given to the Vancouver Board of Trade on September 7, 2012.

Thank you.  It’s a pleasure to be back and to reconnect with so many friends and colleagues, past and present.

Thanks everyone for coming to spend some time today to hear about the powerhouse that is Canada’s mining industry and why I firmly believe there’s a prosperous future for our industry – despite current volatility and price declines.

I want to impress upon you three key points: 

1) the super cycle is not over, it is taking a pause;

2) Canada is a free trader, thrives on trade and has to avoid the trap of protectionism and

3) we need to continue the steps we have begun to optimize Canada’s future as a mining powerhouse.

Before we talk about the future, let’s rewind a bit. It’s with hindsight that one can look back at a period and observe that it represented a major turning point in human history.  The Enlightenment, the Industrial Revolution, the first World War and the end of European colonialism, World War II and the rise of US domination. 

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