sexta-feira, abril 27, 2012

Metals boom reflected in financial crisis

Metals experts gathered in Lisbon this week for the annual meetings of the  International Study Groups  on nickel, lead, zinc and copper.   The Goverment representatives from a large number of countries also participated in a joint seminar on  "How Society Benefits from Mining and Metals Production".

These International Study Groups are autonomous, intergovernmental organizations established two decades ago and located in Lisbon, Portugal. Membership comprises of metal producing, using and trading countries.

Their main objectives are to collect and publish improved statistics on the relevant commodity markets (including production, usage or consumption, trade, stocks, prices and other statistics such as recycling) , with the aim of improving market transparency.  They also publish other information, such as data on industry facilities and environmental regulations. 

Metal commodity prices have been on a sharply rising trend, which some analysts call a "super-cycle" driven by the quantum jump in demand from rapidly industrializing countries, the so-called "China Pull".  

This phenomenon is then reflected in the "China Push", which contributes to the balance of payments crises felt in net importing countries, big (USA) and small (Portugal).  

Mining projects are notoriously complex, and with long gestation periods (planning, financing and construction phases), so supply tends to be somewhat inelastic, contributing to price volatility. With the credit contraction, mining promoters lost access to traditional project debt,  but hight prices made it possible to increase the equity component well above the usual 40-50%.  Other financing packages include  commodity loans with repayment-in-kind (ex. gold loans), including o "Angola model".

See presentation by Mariana Abrantes de Sousa  in
See the press release
For copper, see,
For nickel, see,
For lead and zinc, see,

2 comentários:

PPP Lusofonia disse...

China's current account surplus peaked at over +10% of GDBP in 2007,offering firm proof that the yuan was undervalued.

China's currency is 30% stronger now in real trade weighted terms than in 2005.

The country's CAB surplus fell to 2,8% of GDP in 2011.

Shock it to me disse...

...and the leg bone is connected to knee bone...
Yes, current account balances are inter-linked, since no one is exporting to Mars, yet, as famously said in an earlier Economist article.
Diverging large CAB surpluses and large CAB deficits are both unsustainable, and require commercial banks to recycle the surplus "petrodollars", lending from the net exporting countries to net importing countries. When the avalanche of surplus money is too large, the surplus country bankers get sloppy about credit risk management, their (im)prudential central bank regulators turn a blind eye, and the resulting credit bubbles eventually burst when the net borrowers inevitably collapse.
And then, the net exporting-creditors SHOULD suffer a drastic haircut to their asset values, to rebalance and converge the CAB balances back to ZERO.

If each $20/barrel represents an oil-shock, we are in the 5th oil- shock in as many decades, but who's counting...