read this today
will this have any effect on the areas such as emerald? is it uh oh? or oh well..
Been trying to tell PI’s in mining towns for almost 2 years that the booms over. We’re near or entering the bust phase. Given the length of property cycles you can’t get in and out and still expect to have a shirt on your back.
But then PI’s luv to keep listening to property industry spruiking and self interested parties in stead of looking at the wider picture and underlying fundamentals.
The world is deleveraging which means lower consumption lower demand.
Governments are dealing with debt problems by transferring wealth from the housing sector to recapitalise bank balance sheets. That’s killing growth.
China has massive financial problems few understand and less even know about. Restructuring means growth models of 3% or possibly less. That means huge downward pressure on commodities.
All the info’s out there you just have to put the pieces together.
It appears Vale doesn’t agree with some views expressed here.
JT7 wrote:It appears Vale doesn’t agree with some views expressed here.JT7 wrote:It appears Vale doesn’t agree with some views expressed here.A plan that’s been on the drawing board for some time and makes sense to continue with even though global uncertainty is the theme of the day.
Mining will not stop. Construction of new mines will not stop.
What will change is the price of commodities and the volumes. Both will reduce and some commodities like coal and iron ore I expect to see a substantial drop in price and volume.
China’s virtually come to a grinding halt. Given that it takes 60% of seaborne ore that’s going to literally plunge in price and volume. Added to that is higher quality and a cheaper source being developed in Africa over the next few years. Competitiveness here will have to improve if AU is to retain it’s share.
Both India and China have stated aims to improve energy production outcomes in terms of efficiency and pollution. That’s morphing into a move towards gas as a progressive replacement (not totally) for coal. So coal prices and volumes will come under pressure going forward.
The upshot of all this is that given GFC v2 is just around the corner then the most likely scenario is a retracement back to early 00 prices and volumes.
I would expect to see resource based construction drop off by at least 80% over the next 3 years.
Boom over in my book.
Freckle wrote:JT7 wrote:It appears Vale doesn’t agree with some views expressed here.A plan that’s been on the drawing board for some time and makes sense to continue with even though global uncertainty is the theme of the day.
Mining will not stop. Construction of new mines will not stop.
What will change is the price of commodities and the volumes. Both will reduce and some commodities like coal and iron ore I expect to see a substantial drop in price and volume.
China’s virtually come to a grinding halt. Given that it takes 60% of seaborne ore that’s going to literally plunge in price and volume. Added to that is higher quality and a cheaper source being developed in Africa over the next few years. Competitiveness here will have to improve if AU is to retain it’s share.
Both India and China have stated aims to improve energy production outcomes in terms of efficiency and pollution. That’s morphing into a move towards gas as a progressive replacement (not totally) for coal. So coal prices and volumes will come under pressure going forward.
The upshot of all this is that given GFC v2 is just around the corner then the most likely scenario is a retracement back to early 00 prices and volumes.
I would expect to see resource based construction drop off by at least 80% over the next 3 years.
Boom over in my book.
Well it’s an interesting argument Freckle.
I agree that prices are and will come under pressure due to increasing competition from other resource producing countries such as Africa however, I’d question sovereign risk as a factor as to the stability of this stream of supply. Unfortunately the minority Federal Government is not evoking a lot of confidence from overseas investments and created a nervous environment to commit to large scale projects.
If you’re a believer in the emergence of a middle class society and the industrialisation and shift to a capitalist society of countries such as China and India, demand for resources will continue all-be-it at lower prices.
China is an interesting one. I don’t agree it is at a stand still although it has through self regulation slowed and there is an argument that if Europe sinks into a recession it will be able to stimulate it’s economy similar to 2008.
I guess as always time will tell.
JT7 wrote:China is an interesting one. I don’t agree it is at a stand still although it has through self regulation slowed and there is an argument that if Europe sinks into a recession it will be able to stimulate it’s economy similar to 2008.China’s easing policy and size are widely considered to have complicated China’s ability to cope with economic shock. China did what everyone else did and the outcome as we know today was/is a bigger mess to clean up.
China’s ability to stimulate now is also considered to be severely limited if at all and the last massive stimulation program has actually exacerbated the current crises emerging in their financial system. To many China is an enigma. Comment by MSM over the last 2 years consistently over estimates China’s ability to drive global growth and under estimates its financial problems often citing trillions in foreign reserve as evidence of this.
The following link is a presentation given by Mike Pettis on China’s situation. He expands on the theory of where it needs to go if it is to survive this GFC and continue to grow into the future in a sustainable way.
Patrick Chovanec gives a detailed an interesting account of China’s property market and the part it’s playing in driving down growth.
http://chovanec.wordpress.com/2012/05/16/china-real-estate-unravels/
An interesting article by Nomura on metal consumption based on method of analysis and then compared to western countries.
http://www.alsosprachanalyst.com/economy/the-china-driven-commodities-super-cycle-debate-nomura-edition.htmlI don’t agree with everything he says especially hard or soft landing scenarios for China but this comment struck me as profligate waste in the Chinese construction industry;
Significantly more steel to generate the same USD1mn of GDP as other countries
Significantly more copper to generate the same USD1mn of GDP
Significantly more aluminium to generate the same USD1mn of GDP
and
Miners and mining-related companies have been among the largest beneficiaries of China’s rapid growth since 2001, and if China’s growth model is in the process of changing, even in a small way, then the negative consequences of such change are likely to be felt disproportionately by those who have benefitted the most from the previous trend, especially given current production expansion plans are designed to meet continued and rapid demand growth from China
and then there’s this analysis from Zarathustra that is just plain scary. He provides ample evidence via several scenarios that predict growth from -6% to +4% not the 7+% the world needs China to come up with to keep us in the style we’re accustomed to.
http://www.alsosprachanalyst.com/economy/crash-chinese-economy.html
& here’s one that puts the brakes on Abbot point …
gloveboxinvestor wrote:& here’s one that puts the brakes on Abbot point …It’s just good economic sense.
It’s been said the massive expansion was another ‘cash grab’ by a desperate and economically illiterate Labor government.
The expansion was ridiculous at this stage however the state government is still planning to construct 2 terminals with room for more further down the track. ‘The signficant scale, complexity and potential impacts of the proposed infrastructure are extensive and it wold be many years before the whole of the planned capacity wold be realistically warranted’ (Sweeny cited in The Weekend AFR, May 19-20, 2012, page 4).
With the global volatility at the moment the Federal Labor government is still persisting with $23 a tonne carbon tax?!? Work that one out!
JT this (see below) may inspire some confidence but I think it’s overly optimistic. Many of the current projects are scheduled to be in operation by 2014 with some running out to 2016. Whats not clear is how quickly the scale of the projects will wind down as they near completion and what might be behind them to fill the vacuum so to speak.
http://www.theresourcechannel.com.au/blog/2012-australian-oil-gas-project-summary
I like what I’m reading because I intend to set up a labour hire biz out of Perth initially. The idea that we need to ramp up from 75k jobs to 250k by 2014 gives me hope but again I still think that’s way too optimistic. Another report I was reading though indicates staff TO (churn rate) is in the vicinity of 20%/YR. A stat I like given my job will be to supply replacements. I can here the cash register going flat out when I see these numbers.
Freckle wrote:JT this (see below) may inspire some confidence but I think it’s overly optimistic. Many of the current projects are scheduled to be in operation by 2014 with some running out to 2016. Whats not clear is how quickly the scale of the projects will wind down as they near completion and what might be behind them to fill the vacuum so to speak.http://www.theresourcechannel.com.au/blog/2012-australian-oil-gas-project-summary
I like what I’m reading because I intend to set up a labour hire biz out of Perth initially. The idea that we need to ramp up from 75k jobs to 250k by 2014 gives me hope but again I still think that’s way too optimistic. Another report I was reading though indicates staff TO (churn rate) is in the vicinity of 20%/YR. A stat I like given my job will be to supply replacements. I can here the cash register going flat out when I see these numbers.
Yep it makes for impressive reading Freckle.
I just don’t know how they got it so wrong over here on the east coast. It appears you blokes over in WA have an understanding of how to benefit from this shift.
No wonder whispers of secession never seem to fade…… And who could blame you.
Best of luck with that business mate…if those numbers come into fruition I’m sure you’ll do well.
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