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Pierre Gratton gets irritated when hear others tell him the global commodities supercycle has ended. That’s not especially surprising: After all, as president of the Mining Association of Canada (MAC), it’s part of Mr. Gratton’s job to be bullish about metals.
But the industry veteran also believes the doomsayers lack historical perspective. Yes, he admits, commodities are facing a downturn – but it’s a lot less black-and-white than simple supply and demand.
“Having been in this business now for 13 years, there is a very significant difference between the mood in this downturn and the kind of attitude and the kind of mood that I used to see in 2000 and 2001,” Mr. Gratton said in an interview.
“It’s just a whole different kind of feeling. Back then, times were tough and there was no sense it was going to get better, whereas now, times are tough, but we know it’s going to get better, so it’s a different mentality.”
Global commodity prices staggered in recent months, battered by fears that a strong global economic recovery could be more elusive than initially thought. Losses were especially heavy last week, as prices were hurt by news that the euro zone was back in recession, and fears grew that the United States economy might not be far behind if a combination of spending cuts and scheduled tax hikes are allowed to go forward.
The S&P/TSX materials index, which is dominated by mining firms, has fallen nearly 9 per cent so far this month, and large players such as Barrick Gold Corp., Silver Wheaton Corp. and Centerra Gold Inc. are down even more than that.
Members of MAC – including some of the world’s largest miners that participate on its board – say current headwinds in the global economy have put a pause rather than an end to the so-called supercycle, the phenomenon that drove demand for many non-renewable resources to record levels, in large part because of demand from China.
As prices have fallen, in part due to concerns that China’s giant economy was paring back its growth, major Canadian companies have responded by cutting billions of dollars in spending plans.
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