Why miners aren’t panicking about the latest commodity drop – Peter Koven (National Post – March 13, 2014)

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

While steep declines in copper, iron ore and coking coal prices have spooked investors, they are not severe enough to disrupt the mining sector at this stage.

The vast majority of projects can generate decent margins at these price levels, according to experts. Though in the case of coal, there has been enough of a drop to make high-cost producers nervous.

Prices for all three commodities have been under pressure throughout 2014, but they plummeted over the last several days due to economic concerns out of China. Manufacturing activity has been weaker than expected, and a bond default by a solar company raised fears of tighter credit conditions. That hit the copper market in particular, as many Chinese companies use the red metal as collateral to raise money.

Chinese steel mills are also being threatened as the government tightens environmental standards. That is putting pressure on coal and iron ore.

Copper has sunk to near a four-year-low, falling below the psychological barrier of US$3.00 a pound. Iron ore dropped to US$104 is a tonne after trading above US$130 for most of last year. And steelmaking coal has fallen to US$110, compared to more than US$150 last fall.

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.

Nonetheless, there is some concern in the industry that this copper slump could last a little longer than the prior ones.

“The market is very jittery about risk right now. I think people are going to want to wait and see how this pans out over the next few weeks,” said Derek White,” chief executive of KGHM International Ltd. (formerly Quadra FNX).

For the rest of this article, click here: http://business.financialpost.com/2014/03/12/why-miners-arent-panicking-about-the-latest-commodity-drop/

 

 

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