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UPDATE 5-Vale to scale back investment as global economy bites – by Jeb Blount (Reuters U.S. – December 3, 2012)

http://www.reuters.com/

RIO DE JANEIRO, Dec 3, 2012 (Reuters) – Brazil’s Vale SA , the world’s second-largest mining company, cut estimated 2013 capital spending by 24 percent after a global slowdown and a drop in iron ore prices led the company to rethink expansion.

The retrenchment comes after sluggish growth in the United States, China and Europe diminished demand for metals and weighed on the price of iron ore, Vale’s main product.

Iron ore , a key ingredient in steel, fell to a three-year low in September, and is currently hovering around $115 a tonne. Vale forecasts a $110-$140 a tonne range in the coming year.

Vale will invest $16.3 billion in 2013, down from the $21.4 billion budgeted this year for new projects, research and development and to maintain existing mines and plants, according to a regulatory filing on Monday.

“The outlook for slower expansion of global demand for minerals and metals in the medium term requires rigid discipline in the allocation of capital and greater focus in maximizing efficiency and reducing costs,” the company said in the statement.

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Carney on commodities: ‘wrong conclusions … could do a lot of damage’ – by James Munson (iPolitics.ca – Septmeber 19, 2012)

http://www.ipolitics.ca/

iPolitics’ James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. Here in Part 1, he explains his view that the resource boom is “unambiguously good” for Canada. Tomorrow, in Part 2, Carney explains the supercycle as part of a larger global economic restructuring. And on Friday, he’ll describe the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

Mark Carney doesn’t think Canada has any control over the resource boom.

The 47-year-old governor of the Bank of Canada, sitting beneath the portraits of his predecessors in the bank’s stately Graham Towers boardroom, says that as China and other emerging economies have fuelled a sustained rush for resources, sometimes called a commodities supercycle, they have redrawn the fortunes of developed countries like Canada.

The supercycle has spurred a massive expansion of the country’s biggest commodity export in the Albertan oilsands, triggered the deregulation of federal environmental assessments, made mining projects in the country’s northern regions viable and – at least according to the official opposition – contributed to the decline of the manufacturing sector.

As politicians have wrestled with this historic new force in the Canadian economy, misunderstandings about its root causes have developed and, left unchallenged, these could prompt bad policy choices.

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‘Nature of global growth is shifting,’ and not just for commodities: Carney – by James Munson (Part 2 of 3)(iPolitics.ca – Septmeber 20, 2012)

http://www.ipolitics.ca/

iPolitics James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. In Part 1, he explained his view that the resource boom is “unambiguously good” for Canada. Today, in Part 2, Carney explains the supercycle as part of a larger global economic restructuring. And on Friday, he’ll describe the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

Mark Carney keeps changing the subject.

The governor of the Bank of Canada has agreed to an interview to discuss the resource boom – and whether it’s good for Canada – but the conversation keeps turning to the global economic situation.

“The nature of growth globally is shifting,” Carney said. “In our opinion, we need a sustained strategy to really build our penetration of emerging markets and that is well beyond commodities – that is not a commodities statement.”

That’s the trouble with the resource boom, or the commodities supercycle as it’s sometimes called. It can’t be switched off and on to benefit other businesses that may be having a hard time adjusting to the resource sector’s newfound success.

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‘Now’s the time to build,’ Carney says; Surprise upsides to an expensive dollar – by James Munson (iPolitics.ca – Septmeber 21, 2012)

http://www.ipolitics.ca/

iPolitics James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. In Part 1, he explained his view that the resource boom is “unambiguously good” for Canada. In Part 2, Carney explained the supercycle as part of a larger global economic restructuring. Today, in Part 3, he describes the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

High commodity prices may hurt manufacturers, but they could provide ways to revive the sector and even reasons to go green, said Mark Carney.

The resource boom, sometimes called a commodities supercycle, stems from the rise of emerging economies as the main drivers of global growth and is “unambiguously good” for the country, said the governor of the Bank of Canada in an interview with iPolitics last week.

But while the benefits for the country’s miners and petroleum producers are obvious, Carney’s feel-good conclusion takes into account other opportunities for Canada stemming from the economic momentum of places like China.

“Just because it’s good doesn’t mean it could not be a whole lot better,” said Carney in the interview. “And that gets into questions of how do we maximize the returns, how do we deal with this world that has really been transformed?”

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Dutch Disease [Commodity Supercycle] Speech – by Mark Carney – Governor of the Bank of Canada (Calgary, Alberta – September 7, 2012)

Presented to: Spruce Meadows Round Table – Calgary, Alberta (September 7, 2012)

Introduction

Some regard Canada’s wealth of natural resources as a blessing. Others see it as a curse.

The latter look at the global commodity boom and make the grim diagnosis for Canada of “Dutch Disease.”1 They dismiss the enormous benefits, including higher incomes and greater economic security, our bountiful natural resources can provide.

Their argument goes as follows: record-high commodity prices have led to an appreciation of Canada’s exchange rate, which, in turn, is crowding out trade-sensitive sectors, particularly manufacturing. The disease is the notion that an ephemeral boom in one sector causes permanent losses in others, in a dynamic that is net harmful for the Canadian economy.

While the tidiness of the argument is appealing and making commodities the scapegoat is tempting, the diagnosis is overly simplistic and, in the end, wrong. Canada’s economy is much more diverse and much better integrated than the Dutch Disease caricature. Numerous factors influence our currency and, most fundamentally, higher commodity prices are unambiguously good for Canada.

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NEWS RELEASE: Elevated Commodity Prices “Unambiguously Good” for Canada, Says Bank of Canada Governor Mark Carney (September 7, 2012)

FOR IMMEDIATE RELEASE

7 September 2012
Contact: Jeremy Harrison
613 782-8782

Calgary, Alberta – The global commodities boom drives enormous benefits for Canada, including higher incomes and greater economic security, Bank of Canada Governor Mark Carney said today in a speech to the 2012 Spruce Meadows Changing Fortunes: Global Economies Round Table.

“Most fundamentally, higher commodity prices are unambiguously good for Canada,” Governor Carney told delegates. “The strength of Canada’s resource sector is a reflection of success, not a harbinger of failure.”

The Governor addressed the diagnosis of Dutch Disease for the Canadian economy that suggests an ephemeral commodities boom is causing permanent losses in the manufacturing sector. He countered with three arguments.

First, despite the current strains on global growth, commodity prices are expected to remain elevated, primarily driven by a sustained increase in demand, much of it stemming from the rapid urbanisation of emerging markets.

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Supply constraints remain many commodities’ key driver – E&Y – by Dorothy Kosich (Mineweb.com – December 3, 2012)

http://www.mineweb.com/

Mining’s demand outlook remains strong, and with the policy-induced soft landing in China, the picture for mining coming into next year is bright—says Ernst & Young.

RENO (MINEWEB) – “The fundamental demand story for mining and metals remains strong and we are already seeing an increase in growth in the Chinese economy, with expectations that this will be maintained in 2012,” says Ernest & Young’s Global Mining & Metals Leader, Mike Elliott.

“While we remain confident in the outlook for demand, we are more concerned about how the current hiatus in new capital approvals will impact future supply,” he added. “Supply constraints remain the key driver for many commodities in the medium to longer term, particularly iron ore, copper and lead.”

“There will need to be higher price signals to attract investment for new supply to meet longer term demand,” he stressed.

In a news release issued today, Elliott suggested the “volatility created by the global economic roller-coaster over the past 12 months, and the cost blowouts in the sector from the rapid expansion in recent years has created a very different operating environment for miners coming in 2013.”

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Bay Street: Steel slump puts crimp in Labrador Trough – Julie Gordon (Reuters Canada – December 3, 2012)

http://ca.reuters.com/

TORONTO (Reuters) – “Strike while the iron is hot,” the old saying goes, and a legion of iron ore miners setting up in Canada’s remote Labrador Trough want to do just that. But, for now, they have to wait.

Iron ore, the main component of steel, has turned ice cold in recent months, with the benchmark price .IO62-CNI=SI plunging to $86.70 a tonne in September from $149.40 in April. It has since recovered to about $116 a tonne.

The downward spiral has jeopardized the viability of the sub-Arctic region’s vast iron ore deposits just as the first new mines in decades were opening. Some projects are being put on hold.

As a consequence, shares of junior miners such as Alderon Iron Ore Corp (ADV.TO: Quote), Champion Iron Mines Ltd (CHM.TO: Quote) and Century Iron Mines Corp FER.TO, have tumbled as projects that looked rich at $150 a tonne suddenly lost their luster.

Still, analysts say the region’s potential remains compelling. They caution, though, that investors must look closely at the contenders to judge which are best placed to ride out the bad times and prosper over the long term.

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Labrador City’s huge worker shortage threatens small businesses – by John Shmuel (National Post – December 3, 2012)

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

Finding employees is one of the biggest issues businesses here have

When construction began on a new hotel in Labrador City this year, the developers didn’t even have to finish building it before every room was booked for the next three years.

Welcome to one of northern Canada’s most rapidly growing boom towns. The fuel behind it all are the massive iron ore mines near Labrador City and its twin town, Wabush. The area’s mines have been ramping up in recent years as rising global demand for steel is creating an insatiable appetite for iron.

High pay for working in the mines, which can start at nearly $50 an hour even with minimal experience, has attracted a flood of workers from Atlantic Canada and the rest of the country. It has also, however, created a series of challenges in a region of Canada that is more accustomed to losing workers to other provinces.

“Finding employees is one of the biggest issues businesses here have,” says Jeannot Gamache, of Labrador Rewinding Inc., a motor repair business in Wabush that has been around since 1994.

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On the rocky road to a national energy strategy – by Mary Janigan (Globe and Mail – December 3, 2012)

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.

Mary Janigan is the author of Let the Eastern Bastards Freeze in the Dark.

The West’s fierce insistence on resource control has divided many Canadians who don’t understand the depth of this regional attachment. In a coolly rational universe, there would be federal carbon taxes – and Ottawa might push bitumen oil pipelines across provincial boundaries under rigorous environmental oversight. But the confrontations between the West and the Rest of Canada, which have twined through the decades since Confederation, bedevil the present. As the premiers continue to discuss a national energy strategy, federal politicians should lie low. Ottawa can’t take the lead on such issues without threatening national unity.

This saga of lost time began when Ottawa acquired the vast expanse of Rupert’s Land and the North-Western Territory from the Hudson’s Bay Company in 1870 for 300,000 British pounds. When Métis Louis Riel resisted this takeover of his Red River homeland without guarantees of provincial status and control over the lands and resources, Sir John A. Macdonald compromised. He created the province of Manitoba – but he retained resource control to provide homesteads for settlers and a path for the railway. In 1905, Sir Wilfrid Laurier also kept resource control when he created Saskatchewan and Alberta.

The discrimination rankled: Every other province had entered Confederation with resource control. Whenever the Prairie premiers demanded control, Ottawa resisted.

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They could fix the oil sands – by Tzeporah Berman (Globe and Mail – December 3, 2012)

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.

Tzeporah Berman is the author of This Crazy Time: Living Our Environmental Challenge.

“Mommy, did you hear the news? They fixed the oil sands.” My nine-year-old son explained to me over dinner the other day what he’d seen on TV: “There are nice people who have fixed it and they’ve figured everything out so that all the nature is fine because after they get the oil they pat dirt back on and plant flowers and trees. Even the butterflies have come back.”

In the past year, the oil sands industry has spent hundreds of millions of dollars on advertising to convince Canadians that the world’s single largest industrial development and the fastest growing source of Canada’s global warming pollution is being “fixed.” This advertising blitz has been reinforced by our federal government’s taxpayer-funded advertising campaign and, recently, by former Suncor CEO Rick George’s highly publicized book tour.

We all want to believe it’s possible to just “fix it.” Unfortunately, slick ads claiming a cure for the environment offer nothing but a false sense of security for Canadians. In reality, little has changed on the ground.

We keep hearing that the damaged land is being reclaimed, that we’re going to make a lake district out of toxic sludge pits known as tailings ponds. A wetland-dominated forest out of old mines.

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Keep resource companies out of foriegn aid? You’d only be hurting Africans – by Lucas Robinson (Globe and Mail – December 3, 2012)

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.

 Addis Ababa — Countries throughout Africa are discovering an abundance of minerals, gas and oil beneath their territory. Madagascar is touting trillions of dollars in potential profits from its offshore gas reserves. Zambia continues to pull almost 1900 tonnes of copper from the ground every day – contributing to year-on-year economic growth rates of over 6 per cent.

Ethiopia, where I live, is currently home to 19 million people living on less than $1 per day, and appears to be pinning at least part of its financial security on discovering two to three billion barrels of proven oil reserves. Uganda, Kenya and Tanzania are also looking to exploit newly discovered gas and oil fields, just as Ghana and Nigeria shore up their investments in these sectors.

And yet “supporters of Canada’s foreign aid” are busy criticising the Canadian International Development Agency and International Co-Operation Minister Julian Fantino for what amounts to a very minor engagement with extractive industries. After Mr. Fantino announced a new policy in which the private sector, especially mining companies, would be more directly involved in the delivery of foreign aid alongside CIDA, the response from many quarters was nothing short of venomously hateful. Indeed, many in Canada’s aid community appear to be against any engagement by the private sector in reducing global poverty.

This is not a constructive approach to reducing poverty.

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China’s economy on the upswing; world markets climb – by Carolynne Wheeler (Globe and Mail – December 3, 2012)

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.

BEIJING — Amid European gloom and the looming U.S. fiscal cliff, the Chinese economy appears to be regaining its momentum.

Two separate purchasing managers’ indices ticked up last month: an official state measure released over the weekend reached 50.6, a seven-month high, while a separate tally by HSBC hit a 13-month high, at 50.5.

It’s not often that the two numbers so closely intersect, since one is more heavily weighted toward state-owned enterprises and the other toward the smaller private sector, and suggests the economic winds are changing for China despite external forces.

World stock markets rose Monday on the data. European stocks opened higher. Britain’s FTSE 100 rose 0.4 per cent to 5,892.73. Germany’s DAX added 0.5 per cent to 7,440.67 and France’s CAC-40 advanced 0.5 per cent to 3,575.95.

Wall Street appeared headed for a session of modest gains, with Dow Jones industrial futures rising 0.1 per cent to 13,025 and S&P 500 futures adding 0.1 per cent to 1,416.

“The final November manufacturing PMI stood at a 13-month high of 50.5 on increasing new business and expanding production.

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Blood minerals feed conflict in Congo – by Geoffrey York (Globe and Mail – December 1, 2012)

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.

GOMA, DEMOCRATIC REPUBLIC OF THE CONGO — A few hours after rebel fighters swept into Goma last week, a mysterious convoy of six trucks rumbled up to the Rwandan border on the edge of the city. They were loaded with “conflict minerals” – including tin and tantalum – from warehouses in Goma.

The potholed streets of this sprawling, refugee-filled city, built on volcanic rock, were largely empty. Most people were huddled inside their shacks or high-walled compounds as the rebels seized the city. But at about 5:30 p.m., just before the frontier closed, the trucks reached the border and the guards allowed them to cross from Congo into Rwanda.

“A convoy of six trucks at the same time is unusual,” said Fidel Bafilemba, a conflict-minerals researcher in Goma who received a flood of calls from witnesses when the trucks crossed the border. “Rwanda knew the city had fallen to the rebels, yet they allowed those trucks to enter. They should have stopped them.”

The M23 rebels have been promising for several days to withdraw from Goma, although the pullout was delayed on Friday when United Nations peacekeepers refused to allow the rebels to take a cache of army munitions and equipment from Goma’s airport.

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Suddenly, everyone’s an economic nationalist – by Doug Saunders (Globe and Mail – December 1, 2012)

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.

If you’re a true-blue free-market conservative, this moment could not have been better engineered to make your head explode.

At some point before Dec. 10, Prime Minister Stephen Harper and his cabinet will have to choose between less-free markets or more government involvement in the economy. Mr. Harper will have to decide whether Ottawa will accept or reject two foreign purchases of Canadian petroleum companies, Nexen Inc. and Progress Energy Resources Corp.

This will be a test of the long-accepted principle, articulated by Brian Mulroney in 1985 and broadly accepted by all Canadian governments since, that “Canada is open for business” and welcomes foreign investment.

In the three decades since, Industry Canada has received 1,664 applications for foreign takeovers of Canadian companies, leading to a foreign-ownership stake of $915-billion. So far, it has formally rejected only one.

What complicates things is that the buyers in the Nexen and Progress Energy cases are state-owned corporations: China’s giant oil company CNOOC, and Malaysia’s Petronas.

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