The real problem facing mining companies in the global context is not demand but the ability to supply.
The real problem facing mining companies in the global context is not demand but the ability to supply.
A new Western Australian analysis of the global minerals commodities markets has revealed a paradigm shift in consumption, led by China and Asia, that would underpin current high prices and possibly see them rise into the next decade.
The report, prepared by Resources & Technology Marketing Servicing Pty Ltd, indicates the major beneficiaries will be iron ore, nickel, copper and zinc miners.
RTM managing director Andrew Simpson, also a non-executive director of Consolidated Minerals Ltd, told WA Business News there had been a major and permanent increase in the global market size.
This was particularly evident in the Asian consumption of stainless and galvanised steels.
The demand was being driven by rapid economic expansion generating increased personal wealth and the desire for quality low maintenance housing, motor vehicles and appliances. “People throughout Asia want to build things they don’t have to paint, that will last; to build recyclable cars and that means steel,” Mr Simpson said.
Asia’s metals consumption was increasing faster than its gross domestic product, resulting in tight supply of most metals for at least three years. “Any disruptions to existing production or delays to start up projects will only put more pressure on prices,” Mr Simpson said. The supply shortage was exacerbated by insufficient exploration investment, the result of an abysmal return on investment in recent years, increasing development and operating costs, declining grades and the remoteness of new mining operations, all at a time when global stocks were at minimum levels.
Things were unlikely to change in the short term. “It now takes about nine years from confirmation to get a copper or iron ore mine into production,” Mr Simpson said.
Nickel remained a prime growth market with RTM predicting the Chinese steel industry would continue to expand at an annual six per cent to 2010.
Mr Simpson said current nickel production from 60 per cent traditional sulphide and 40 per cent more expensive laterite resources would reverse in the next few years, with the majority of production coming from laterites.
These big newcomers include BHP Billiton’s $2.4 billion Ravensthorpe project, 150km west of Esperance with refining in Townsville and Canadian Inco’s $2.6 billion Goro mine in New Caledonia, both due to come on stream mid to late 2007, followed by CVRD’s $1.6 billion Vermelho project in Brazil a year later. Even if the three met production levels, RTM said with nickel demand over 1.75 million tonnes a year by 2010, the challenge for suppliers would be to fill the 400,000 t/year gap between projected production.
