Mining Week 01/’12: New year – Same fear
January 7, 2012
Top Stories of the Week:
- Alcoa cuts aluminium production in fear of lower demand
- Potashcorp temporarily closes a third mine because of low demand
- After recently temporarily closing down Lanigan and Rocanville mines, PotashCorp now decided to temporarily close Allan mine to because of lack of demand for fertilizer. The combined shutdown of the three mines results in approx. 1 million tonnes of potash, or some 10% of the company’s annual production.
- Sources: Wall Street Journal; PotashCorp Q4 market analysis report; text
- Unions in Canada and Zambia make their case for wage increases
- A union representing copper mine workers in Zambia signaled the foreign miners will have to agree to higher salary increases than the average offer of 11% to prevent widespread strikes. At the same time Rio Tinto Alcan and Caterpillar are taking a strong position against unions in Canada by locking out union workers after expiry of the negotiation periods.
- Sources: Wall Street Journal on Zambia; Wall Street Journal on Canada
Trends & Implications:
The mining industry for the last 2 years has been and continues to be gripped by 2 paradoxical fears:
- The fear for slowing demand due to the lack of recovery after the financial crisis – With the financial crisis over 4 years old already the typical macro-economic cycle of 6-9 years has clearly been disrupted. Governments and companies are still operating in ‘crisis fighting’-mode because demand does not pick up like after a regular economic downturn. Large investments are still undertaken because the belief in the long term demand driven by population growth and growth of average GDP/capita is unchanged, but at the same time companies are trying to manage short term lack of demand by scaling down or temporarily closing operations.
- The fear for strikes and civil unrest resulting from struggling individuals facing mining companies that continue to realize high profits – Despite the financial volatility the commodity prices generally have remained high, making mining companies among the few companies in the world that continue to generate high profits. With people around the world facing the economic crisis and feeling its impact, friction develops between the rich companies and the less well off workers and neighbours.
©2012 | Wilfred Visser | thebusinessofmining.com