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Metals to stage mid-term surge Posted: Mon, 09 Feb 2009 [miningmx.com] -- THE drastic decline in commodity prices was only a temporary setback in a long-term bull market, said Kevin Norrish, director of commodities research at Barclays Capital. "[The commodity market] has had a bucket of cold water thrown over it and now it's gasping for air," said Norrish who was presenting on overview of the commodity markets at the Indaba Mining Conference in Cape Town. "This difficult phase will pass. In my view we're still in a commodities bull market," said Norrish. Notwithstanding the possibility of a global technical recession in almost, if not all, every OECD market, there were already signs already of either a bottoming out or an improvement, said Norrish. This was because producers had either moved quickly to cut supply or there was already a flickering of renewed demand. "There's been a much faster reaction [to the decline in metal prices] that I've seen in any other cycle," said Norris of the way producers had responded. Less hedging, which means that producer supply cuts were more visible, and the absence of cash in the system meant unprofitable operations cannot be subsidised. About 70% of the aluminium industry was losing money at current metal prices while some 10% to 15% of the copper market was unprofitable, said Norrish. Capital expenditure and new projects had also been either cut back or shelved. For instance, Norrish said there had been a one-third reduction in global mining capital expenditure, equal to about $30bn in capital, he said. "This will have a significant effect on future supply," said Norrish. Click Here to subscribe to our daily newsletter
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