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Commodity Super-Cycle and Decline

Jim O’Neill: BRICs, MINTs strong despite emerging market wobbles – by Tim Cocks (Reuters India – March 25, 2014)

http://in.reuters.com/

LAGOS – (Reuters) – The large, fast-growing emerging market countries dubbed the BRICs and MINTs are still likely to be the most promising investment destinations over the next decade, despite emerging market turbulence, Jim O’Neill, who coined the terms, said.

Former Goldman Sachs economist O’Neill came up with the name BRIC in 2001 to group Brazil, Russia, India and China as countries whose growth will shape the world economy in the coming decades.

This year, in a series on BBC radio, he championed the MINT group of countries, similarly blessed with fast economic growth and large, young populations – Mexico, Indonesia, Nigeria, Turkey – as the next economic giants after the BRICs.

“The BRIC and the MINT countries, if I’m right, over the next decade will … shape the world economy’s development,” O’Neill told Reuters on Tuesday on the sidelines of an Africa Finance Corporation conference in Nigeria’s commercial hub of Lagos. “And if that’s the case, they will be the most successful places in terms of investments too.”

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Jeb Handwerger: China Isn’t Slowing Down, It’s Buying Up (Resources, that Is) – Interview by Tom Armistead (The Energy Report – March 18, 2014)

http://www.theaureport.com/

Headlines about a Chinese economic slowdown may get good web traffic, but the real story is that China is buying up uranium and other resources around the world, says Gold Stock Trades writer Jeb Handwerger. Meanwhile, tensions in Russia highlight the massive country’s resource dominance in natural gas, oil, uranium, platinum group metals, rare earths and nickel. Handwerger tells The Mining Report that North America is already acting to develop resources that can meet both domestic and international demand—and this global geopolitical uncertainty is an investment opportunity.

The Mining Report: Jeb, how will the companies you follow be affected by the crisis in the Ukraine and the growing tensions in East Asia over China’s claims on islands held by Japan and the Philippines?

Jeb Handwerger: This is really all about natural resources and the ability to control the trade. There’s a whole list of 10 to 15 strategic minerals that come from China almost exclusively. Russia, on the other hand, has a major control on palladium, platinum group metals and nickel, as well some of the agricultural fertilizers, such as potash. Russia also has a critical supply of uranium; it produces about 3,000 tons of uranium, close to double United States production of uranium. Not only that, but Russia has strategic ties with Kazakhstan, which produces close to 20,000 tons of uranium—over 36% of global supply.

I’ve written for years that these metals and these materials are at risk of critical supply shortfall.

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RIP commodity supercycle, 2002-2014 – by Scott Barlow (Globe and Mail – March 11, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Metals prices in China were crushed Monday as the country’s economic numbers continued to drive nails into the coffin of a global commodity supercycle that has enriched so many Canadians since 2002.

Copper prices in Shanghai fell 5 per cent Monday after the government released trade statistics showing an 18.1-per-cent year-over-year decline in exports. The copper price now stands 8.6 per cent below highs hit on Feb. 17. Commodity price carnage was also apparent in iron ore. The spot price fell 8.3 per cent Monday, and is now lower by 20 per cent year to date.

The export data was extremely disappointing to economists who had predicted a 7.5-per-cent increase. Seasonal factors were definitely in play – Chinese New Year celebrations always skew the early-year data. Even so, the number is easily soft enough to confirm the economic weakness suggested by a March 2 PMI report that showed a contraction in manufacturing activity.

Economists expect that China’s gross domestic product growth will reach the government target of 7.5 per cent this year, so at first glance the recent volatility in commodity markets makes little sense.

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Expert Mining Panel Discusses Possibility Of Reaching ‘Peak Discovery’ – by Alex Létourneau (Kitco News – March 10, 2014)

http://www.kitco.com/

(Kitco News) – During the 82nd Prospectors and Developers Association of Canada convention in Toronto last week, Exploration Insights founder Brent Cook rounded up some mining heavyweights to look into the possibility of having reached peak discovery in the mining industry.

Kitco News’ informal panel included Catherine McLeod-Seltzer, chairman of Bear Creek, Alex Davidson, director with Yamana Gold, Miles Thompson, CEO of Lara Exploration.

While the guests covered a range of topics linked to where the mining industry is at, and where it could be heading, the idea that the mining industry will be a low-grade driven sector moving forward triggered a discussion.

“There’s always a change going on in the mining industry,” Davidson said. “We get smarter about where we explore, we can look from further away, we can look in different countries, our risk tolerance is a gazillion times more than it was 20 or 30 years ago.

“So I think we are going to find more deposits, they may be deeper which would require higher grade, or we’ll refine the mining methods to get cheaper mining methods, but I think there’s as much potential, in certain areas, as there ever has been.”

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Jim O’Neill interview: Making a MINT in the new BRICs (Grant Thornton – March 6, 2014)

http://www.grant-thornton.co.uk/

Ed Nusbaum, Global CEO at Grant Thornton International, talks to leading economist Jim O’Neill, about where the world’s next economic powerhouses will be.

When economist Jim O’Neill coined the term ‘BRIC’ in 2001 to group together the fast-growing economies of Brazil, Russia, India and China he couldn’t have known that the insight would prove so powerful. In our exclusive interview, he reviews how the BRICs are performing, presents a new acronym and reveals who he thinks will win the economic race to export growth: Germany or the UK.

From a business investment point of view, which markets excite you most over the next decade?

The markets which excite me from an investment perspective depend – and vary –according to the price and actual growth compared to expectations. So today, for example, even though Chinese growth is slowing, its markets have fallen so much that the implied price of the equity market compared to earnings is quite low. At current prices at the time of writing, most BRIC markets are quite cheap, both relative to the rest of the emerging world and the developed world. So for me, China, Brazil and Russia look interesting.

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MINT: The Next Economic Giants – by Jim O’Neill (BBC Radio 4 – January 2014)

http://www.bbc.co.uk/

Economist Jim O’Neill was the first to spot the huge potential of the BRIC countries – Brazil, Russia, India, and China, and predict how the world would change. In this landmark series, Jim travels to four countries which could one day stand alongside them and join the world’s economic elite. Mexico, Indonesia, Nigeria, and Turkey – MINT – could become the new name on people’s lips, and further overturn the old world order.

For the four-part radio espisodes, click here: http://www.bbc.co.uk/programmes/b03pn2h6/episodes/guide

Mexico

Mexico’s hope of becoming the workshop of North America was shattered by China’s domination of cheap exports, but recently, the Mexican dream is in sight again. As Beijing opts for “quality not quantity” of growth, companies are returning, drawn by competitive labour and proximity to the US market. In the first part of a landmark series, the economist Jim O’Neill travels across Mexico to investigate. He discovers that its ambitions now go far beyond cheap manufacturing. But can Mexico’s youthful, reforming government overcome the challenges of widespread poverty, crime and a huge number of people living outside the formal economy?

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Jim O’Neill interview: Why the Mints come after the Brics – by Sophie McBain (NewStatesman – January 23, 2914)

http://www.newstatesman.com/

The economist Jim O’Neill, who coined the term “Bric countries” (referring to Brazil, Russia, India, China), now says that the term is now tired, and argues that immigration should be widely accepted as a good thing.

Thirteen years ago, Jim O’Neill, a chief economist at Goldman Sachs, coined the term “Brics” to describe the four countries he predicted would be among the next global economic giants: Brazil, Russia, India and China. The acronym caught on, to an extent that O’Neill describes as “flattering” – but he also feels “irritated” by having to defend his theory.

“Someone has just written a book called Broken Brics, and I’m just like, yawn,” he says, collapsing into his seat with feigned exhaustion. “If I dreamt it up again today, I’d probably just call it ‘C’,” he adds, perking up. “China’s one and a half times bigger than the rest of them put together.”

But O’Neill, now 56, is moving on, from both banking and the Brics. He left his role as chairman of Goldman Sachs in April 2013 after 18 years of working at the investment bank. Deciding that he couldn’t better his former role, he resolved to do something different. I’m meeting him at a private members’ club in central London to discuss his newest acronym, Mint, and the accompanying Radio 4 series.

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BRICs Creator O’Neill Wowed by New Lula’s Success: Mexico Credit – by Nacha Cattan (Bloomberg News – December 18, 2013)

http://www.bloomberg.com/

Jim O’Neill has been tracking economic reform initiatives in countries across the world during his 33-year career on Wall Street. Only a few of them, he said, rank higher than what Mexico achieved this year.

“I can’t think of many other countries that have had a period of such deep reforms,” said O’Neill, who coined the term BRICs while serving as a top Goldman Sachs Group Inc. economist in 2001, correctly predicting a surge in growth for Brazil, Russia, India and China. “Markets are only just really starting to give Mexico any credibility now that the energy reform is going through.”

President Enrique Pena Nieto shepherded through at least 10 constitutional amendments in his first year in office, including measures to open Mexico’s oil industry to private investment for the first time in 75 years. He is slated to enact as soon as this week the new drilling rules, which are aimed at luring oil majors from Exxon Mobil Corp. (XOM) to Chevron Corp. (CVX), after a majority of states ratified the changes adopted by the national congress.

O’Neill estimates the reforms will boost Mexico’s long-term economic growth to 5 percent from the current 3 percent, helping trigger a bond rally that will top gains in other emerging markets next year. Barclays Plc predicts the reforms will spark investor demand for bonds in coming weeks, with yields on longer-term securities falling about 0.25 percentage point by year-end.

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Mitsui Mining Boosts Zinc Fee 70% as China Demand Rises – by Jae Hur and Ichiro Suzuki (Bloomberg News – February 5, 2014)

http://www.bloomberg.com/

Mitsui Mining & Smelting Co. (5706), Japan’s biggest zinc producer, raised annual charges to overseas buyers by as much as 70 percent as consumption increases in China. Futures in London snapped a 10-day losing streak.

The higher fee compares with a 15 percent gain for special high-grade metal last year, said Osamu Saito, a general manager in the Tokyo-based company’s business department. He declined to disclose any dollar values.

Zinc stockpiles monitored by the London Metal Exchange shrank 31 percent since the start of 2013, with inventories in Asia contracting 68 percent. Morgan Stanley forecasts cash prices to average $2,127 a metric ton in 2014, a 10 percent increase on last year as the zinc deficit widens sixfold.

“The market’s been waiting for a turnaround in zinc,” said Gavin Wendt, the founder and senior resource analyst at Sydney-based Mine Life Pty. “There are a lot of people, including myself, that think that 2014 could be the year.”

The metal for delivery in three months in London climbed 0.8 percent to $1,967 a ton at 2:16 p.m.

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Base metals in a post super-cycle world – Lennon – by Geoff Canday (Mineweb.com – February 4, 2014)

http://www.mineweb.com/

Jim Lennon discusses why demographics alone aren’t enough to recreate the massive type of growth in China that led to the super cycle.

CAPE TOWN (MINEWEB) – GEOFF CANDY: Hello and welcome to this Mineweb.com Newsmaker podcast, my name is Geoff Candy and joining me here live at the Cape Town International Convention Centre for the 2014 Mining Indaba is Jim Lennon, he’s the managing director at Red Door Research.

Jim, you’ve just done a presentation, the key note, about where we’re headed from a metals point of view, where the super-cycle is or if it’s going to come back, just generally speaking, the lay of the land. One of the things that struck from that is that it does seem to be moving very much from a demand-driven story to what’ s going to happening with supply over the next ten, 15, 20 years, is that a correct reading of things?

JIM LENNON: Partly, I think first China will continue to be a dominant factor on the demand side, the rates of growth in China were high double digit for the last ten years, we’re now seeing that slow down, so necessarily the growth rates are slowing. However, the volume required as a result of that slow growth because you’re working off the high base is still very, very high.

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EY forecasts improvement in mining deals in 2014 – by Dorothy Kosich (Mineweb.com – February 3, 2014)

http://www.mineweb.com/

“A steady improvement in market conditions should see a gradual return to deal-making in the mining and metals sector,” says a new EY report.

RENO (MINEWEB) – “The mining and metal sector is entering 2014 with a more positive outlook: confidence in the global economy is improving, companies have taken action to deleverage balance sheets and the industry-wide focus on productivity and efficiency should begin to yield results,” says consultancy EY.

In their report, EY mining analysts advised “…we expect the gradual strengthening of mining and metals equity valuations to continue and the increased availability of capital.”

Nevertheless, the analysts cautioned, “As supply and demand struggle to return to post-supercycle equilibrium, we expect further price volatility to occur for at least the next two years. This will see caution prevail: any uplift in M&A activity and improvement of capital raising conditions will be gradual and will require innovation in pricing to tame volatility.”

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Mining’s $8 Billion of Private Equity Seen Reviving M&A – by Jesse Riseborough and Ruth David (Bloomberg News – February 3, 2014)

http://www.bloomberg.com/

The world’s mining assets may be the target of mergers and acquisitions as an $8 billion pool of private-equity money that has lain dormant is stirred this year by attractive valuations and predictions of resilient demand for raw materials.

Some of the biggest names in the industry are keen to buy assets at the same time as the world’s largest producers including Rio Tinto Group are shunning unwanted mines. Former chief executive officers Mick Davis of Xstrata Plc and Barrick Gold Corp.’s Aaron Regent are plotting a return to the business by buying mining projects, backed by private funds. Last week two new mining investment ventures were started, one backed by Warburg Pincus LLC, the other founded by two former JPMorgan Chase & Co. bankers.

While buyout firms have increasingly targeted mining since 2012, only about 14 percent of the almost $10 billion raised in the last two years has been deployed, according to data compiled by Bloomberg Industries. That could change if they face pressure from their investors to act, Michael Rawlinson, co-head of mining and metals investment banking at Barclays Plc.

“They’ve all set up, no one’s done anything,” London-based Rawlinson said. “The sand is going through the hourglass and the money is going to get taken away if they don’t start spending.”

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Commodities poised for a comeback – by Eric Atkins and Carrie Tait (Globe and Mail – January 29, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

TORONTO and CALGARY — U.S. growth and a steadying Chinese economy are giving a boost to beaten-up commodities, slowing a multiyear slide that has weighed on Canada’s most important exports.

Commodity prices have been on a downward slope for the better part of three years, as limping western economies and a slowing China curbed demand for raw materials. More recently, however, signs of stability in key commodity-consuming regions have provided some optimism that the worst could be over.

The widely watched Thomson Reuters-Jefferies CRB index of commodities has climbed 4 per cent from its recent low earlier this month. Natural gas has been a standout among commodities, surging about 25 per cent since early December.

From zinc to copper and oil, a range of commodities is expected to find a floor this year as markets overcome recent hurdles and factories boost production to meet rising consumer demand, according to some analysts.

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Contagion Spreads in Emerging Markets as Crises Grow – by Ye Xie and John Detrixhe (Bloomberg News – January 24, 2014)

http://www.bloomberg.com/

The worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by political and financial instability.

The Turkish lira plunged to a record and South Africa’s rand fell yesterday to a level weaker than 11 per dollar for the first time since 2008. Argentine policy makers devalued the peso by reducing support in the foreign-exchange market, allowing the currency to drop the most in 12 years to an unprecedented low.

Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.

“The current environment is potentially very toxic for emerging markets,” Eamon Aghdasi, a strategist at Societe Generale SA in New York, said in a phone interview yesterday. “You have two very troubling things: uncertainty about the Fed policy, combined with concerns about growth, particularly in China. It’s difficult to justify that it’s time to go out and buy emerging markets at the moment.”

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COLUMN-China’s 2014 commodity demand subject to policy influences – by Clyde Russell (Reuters U.K. – December 19, 2013)

http://uk.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, Dec 19 (Reuters) – China’s commodity demand has been lumpy this year, with weakness in crude oil and copper being offset by robust gains in iron ore and coal, and this pattern is likely to continue into next year.

However, the relative winners may change. Much will depend on the track of economic reforms and how much success the world’s largest commodity user has in rotating its economy to be more consumer-led.

China’s official target for gross domestic product growth was 7.5 percent for 2013, and while the target for next year has not yet been announced, it’s likely to be maintained or perhaps lowered slightly. But more important than the overall target for GDP is how the growth is achieved.

The pattern for the past two years has been that China’s economy has seen momentum losses in the key industrial sector, followed by a re-acceleration in growth as policies are implemented to boost infrastructure and construction investment.

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