Mining News

Two Views on China

Posted by Alana Wilson on 3/13/2014 3:42:10 PM

By Dr. Kenneth P. Green

Peter Koven has written an interesting article on a counterintuitive subject: despite a recent fall in commodity prices, mining companies are not showing severe concern. Koven observes that prices have fallen sharply for copper, iron ore, and coking coal, but reports that, “The vast majority of projects can generate decent margins at these price levels, according to experts.“ Koven attributes the recent fall in prices to events in China, where manufacturing is down, credit is tightening, and where steel mills are threatened by governmental tightening of environmental standards. Still, as Koven observes:

Mining executives said they are not panicking yet. They have seen numerous fluctuations just as dramatic as this one over the last few years. For example, iron ore prices plunged 30% in August of 2012, sinking below US$85 before rebounding. And copper has dropped below US$3 a few times since 2009, bouncing back quickly each time.

Koven reports that not everyone is quite so optimistic, reporting that high-cost producers are becoming “nervous,” and suggests that the low prices may cause companies to reconsider green field projects. He quotes TD securities analyst Greg Barnes, who suggested, for example, that “Teck Resources Ltd. will likely defer its Quintette project in British Columbia until the market recovers.”

The full article is well worth reading.

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