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Scotiabank commodity guru says Chinese demand the biggest factor for what sells, what doesn’t
A influential Canadian bank economist says that if you want to predict which Nunavut mining projects are likely to make it and which ones aren’t, you have to study China.
“I pay far more attention to the Chinese economy than to that of the United States,” Patricia Mohr, Scotiabank’s commodity price specialist, said at the April 8 opening of the Nunavut Mining Symposium.
That’s because China now represents more than 40 per cent of global demand for commodities. That includes metals that lie embedded in the earth’s crust across northern Canada, such as zinc, copper, nickel and iron ore.
Many factors influence their prices — including economic growth, or the lack of it, in the United States, the European Union, Russia, Brazil and India, as well as the growth or decline of existing ore stockpiles. But the biggest factor of them all is the China’s relentless movement towards an industrialized and urbanized future for the 1.3 billion people who live within its borders, Mohr said.
To that end, she said the Chinese government plans to build social housing for 100 million people who they will move from the countryside into the cities.
And the Chinese government plans to renovate 4.74 million housing units in shanty towns.
These and other projects are all “metal intensive and steel intensive,” Mohr said, which means mineral prices will improve by 2015, following the global economy’s sluggish growth record last year.
“I think that things will pick up from here on in,” Mohr said.
For example, this means that zinc producers, such as MMG, which operates the Izok corridor project in the western Kitikmeot can look forward to better prices in a couple of years.
MMG announced this past November that it has suspended its participation in an environmental review of the Izok project for at least a year, pending more work on an updated project description design and more work aimed at finding ways to make the plan viable.
“Zinc has been a bit of a dog in recent years. Everyone knows that,” Mohr said.
But she said that zinc is now positioned to become the “next base metal play” and she predicts that zinc will rise from its current low of about 75 cents a pound to $1.25 a pound by 2015
The world’s current zinc reserves are getting depleted, which will lead to higher prices when supplies shrink in the near future.
Another commodity that’s due for a price increase is nickel, Mohr said, because of a decision by the government of Indonesia this past January to ban the export of all unprocessed nickel ore.
This will likely raise the price of zinc from its current low of $6.80 a pound to $9 by 2015, she said.
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