Mining executives are a sober lot these days—“capital discipline” has replaced “commodity supercycle” as the industry catchphrase. Things are looking somewhat brighter recently, however. Chinese metals demand has staged a limited, but real, rebound, and U.S. President-elect Donald Trump is flogging an infrastructure-investment plan.
Meanwhile share prices of the big five diversified miners are all up over 100% from January lows. Given the improved demand environment, investors could wonder whether mining-company capital expenditures have come down enough to produce another sustained period of rising prices for industrial metals.
Unfortunately, the answer is probably not yet, although a global infrastructure push led by Mr. Trump’s America could move the needle if it were large enough.
Mining capex has fallen rapidly since its 2012 peak, but the slowdown in Chinese construction, the main driver of demand, has been even more drastic.
Even after this year’s real-estate bounce, floor space under construction in 2016 is on track to be only around 250 million square meters (300 million square yards) higher than last year. That is below annual gains running at around 300 million square meters in the mid 2000s.
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