Thursday, 18 June 2009

Increasing optimism in the mining sector

I have just received this email from Will Coetzer, a consultant on International & Emerging Markets :

"During the last month we have steadily been seeing increased optimism around the world. In addition to the recent poll I embarked on researching the views of a number of mining analysts to also ask their views.

Mainly my research led me to Investment Banking Analysts and they offer very interesting insight as to the recovery of the mining sector. One analyst recently returned from China, observing “increasing evidence of a rebound in Chinese demand for mining-related commodities” With that in mind, they are more positive on the outlook for those commodities that China would need to import but which face structural supply issues. For that reason copper, coking coal and zinc remain a preferred commodities for China. China, of course, is the catalyst the world looks to when benchmarking any recovery. This then must be a good sign.

Regarding copper, another Analyst notes “similar to the early part of the last economic cycle, there exists today a significant amount of scepticism regarding both the current copper price and copper’s prospects. We believe such scepticism is misplaced. The bearish copper argument, as we understand it, is that copper is trading higher on the cost curve than most other metals. Therefore, the bears argue it is an easy short. With copper up 51% year to date, such bearish arguments have not been vindicated”.

In terms of our personal experience from a Talent point of view we have certainly seen optimism from clients. As reported in previous news letters, a number of our clients are gearing up for major construction projects again, and speaking to an Executives at a leading EPCM, he confirmed they’re working on more studies probably now than the last 12 months combined. "

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