We at CBC have enjoyed a good year and we are thankful for this success. Business is now tailing off for the Christmas & New Year quiet time as expected.
Although commodity prices remain depressed, investment funding in mining is still away on vacation and mining stocks and sentiment are miserably low, there is a glimmer of hope for the industry.
An unarguable fundamental is that the world needs mineral resource commodities. As I sit writing this, almost everything in sight requires mineral resources. Steel, electronics,
stationery. even my ceramic tea cup. We as a species cannot avoid the use of mineral resources. We need to keep mining.
Our current situation is a matter of supply and demand. When supply exceeds demand, as at present, prices drop. Yet it's a cycle. With low demand, spiked by market sentiment (China's outlook yesterday being a topical point) and the economy generally, we are at a low point on this cycle. Hopefully we won't drop lower.
The lower that prices drop, supply will follow suit and drop too. Closure of unprofitable mines; suspension of new projects; deferment of development strategies. In time, we will reach a new balance. Are we close to this?
This 'new balance' has a stabilising effect on prices. It then only takes a small increase in demand to positively affect commodity prices. Mining companies must react and increased production results. So the cycle grinds around again and commodity prices rise, often quickly.
World economies are considering growth strategies and that will be good for mining. As growth strengthens, commodity prices will rise and investment will follow. This isn't new. It's been happening for centuries.
For our business, it's all a matter of timing. When will demand surpass supply? No one knows yet, but there are signs that it will not be too long now.
As SCM consultants, we are keen to be part of the upturn when it does arrive. A strong supply chain is crucial for success. After all, a high percentage of costs are supply related. There is never a better time to make sure that processes are in order.
Write a comment