The continuing slowdown in China is affecting the global economy’s growth, and it is the mining segment that suffers most.
A lot of mining companies across the globe is suffering because demand for most extracted commodities such as base metals is continuously decreasing, and such is altering the global mining commerce radically.
China and Japan, which are among the world’s biggest economies, are also the world’s largest base metal and coal consumers, accounting for over 80 percent of the world’s extracted mineral consumption. Other Asian countries like South Korea, India, and Indonesia are also among the heaviest consumers of industrial metals in the world.
Global mining commerce centers on China
Now that the construction boom in China is finally over, builders are left with nothing but hope that consumers would spring up and buy as though it was 2009 again. Today, steel producers are moderating their metal consumption, while industrial base metal producers from different parts of the globe—the Philippines, Canada, Russia, New Caledonia—are doing their best to fill in the growing demand, which is expected to dwindle anytime soon.
As of today, demand for base metal is high, as consumers are stockpiling supplies lest they would end up putting their respective operations on halt due to supply deficiency. On the other hand, copper, after long years of undersupply followed by an overflow of demand, is now experiencing oversupply, resulting to a series of bearish prices.
Copper is down by 13 percent so far this year on news that the market is heading into a supply surplus buoyed by slowing economic growth in China, which consumes nearly half the world’s copper.
Asian, Philippine mining firms soar amid precarious segment
Over the past months, since January 28, a lot of Asian mining firms soared amid recent bearish prices in the base metal segment.
India’s Vedanta (VED.UK) and Kazakhstan’s KAZ Minerals (KAZ.UK) surpassed their recent downs by 50 percent, while Fortescue Metals Group Ltd., who has a big Asian market, saw its share price soaring by 31 percent.
Mining firms in the Philippines are currently on export frenzy after nickel shortage upset Chinese and Japanese steel producers. The country’s mining boom made many local lower-grade suppliers the most important entities in the nickel segment, especially now that Indonesia remains adamant on maintaining the unprocessed mineral embargo.
Nickel Asia Corp. is eyeing to double up ore exports in 2015 after breaking sales records last year. Its President and CEO Gerardo Brimo said that the company is up by 28 percent from last year and surpassing its target of 17 million wet metric tonnes.
GLOBAL Ferronickel Holdings Inc., the Philippines’ third biggest nickel producer, said that it is now preparing for intensified production in 2017. The company is now ramping up its production by conducting more explorations in the southern regions of the country, in Palawan and Zambales.
Its annual production surpassed last year’s sales prediction, giving the company a $100 billion net income. GFHI is expecting another $130 million additional income by the end of 2015.
Another local mining company, Pax Libera Mining Inc., will open four more sites this year to accommodate the growing demand for Philippine nickel.
However, experts believe that the Philippines is not fully capable of filling in the gap that Indonesia left. In the second quarter, when the feared supply deficit finally takes place, steel consumers are expected to look for alternative suppliers outside the Philippines. By now, a large volume of Philippine ore has already been bought by China and Japan.
Several smallish mining companies have been enjoying the spotlight since the Indonesian ore ban was implemented. Among which are Amur Minerals Corporation (OTC:AMMCF), Asian Minerals Resources (V.ASN), and Sirius Resources, whose respective mining projects are seen to play a significant role in improving the ailing nickel supply segment.
On Australian mining
Another winner from this shaky supply-demand segment is Australia, as it has been busy supplying ore and other unprocessed minerals to China since the very first day of the Indonesian ore prohibition.
Experts believe that Australia will be a key entity in the supply sector, especially when it comes to sending ‘export resources’—unprocessed minerals, coal, natural gas—to consumers inside and outside Asia.
China’s enthusiasm on storing resources as part of preparing its economy for the worst will serve Australia well. The country remains a healthy source of base metal, coal, and other mining products.
In the past, Australia’s macroeconomic institutions successfully endured various global economic crises, and remained as one of the world’s most resilient and stable economies.
During the first terms of trade boom since the 2008 recession, inflation remained well-behaved and growth was surprisingly stable.
But analysts believe that Australia should reinvent itself to be established as an essential entity in the Asian economy. The country must stop competing with other Asian firms and start positioning itself to complement production and economic activity in Asian supply chains.
Today, it is without a doubt that everything that’s happening in Asia, specifically in China, is affecting the global mining commerce. This implies that a brighter future for global mining means expecting a better Chinese economy first, an occurrence that remains blurry as of this writing.