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A haul truck drives through the Ukhaa Khudag open coal mine, which is part of the huge Tavan Tolgoi deposit, in the Gobi desert, in this September 11, 2011 file photo. Mongolia is home to some of the world's biggest unexploited mineral deposits, and has become one of the hottest destinations for billions of dollars of mining investment, a scale which has already transformed the economy.

STAFF/REUTERS

Mining investors are at a critical juncture. The coming months should reveal just what's going on with the super-cycle, the collective term for the multiple drivers of the now-fading commodity boom.

The sluggish global recovery and worries about Chinese raw materials demand have pushed Thomson Reuters's U.K. Metal & Mining Index down 28 per cent from its first quarter peak, and almost 40 per cent from its post-crisis 2011 high. Commodity bulls are pinning hopes on more aggressive Chinese stimulus, which there's good reason to expect given the weakness of recent data. But Beijing may struggle to revive the building boom that has fed the super-cycle.

A three-year, stimulus-fuelled construction binge has left Chinese private property developers with stretched balance sheets. Even if Beijing launches more stimulus, developers may lack the appetite to borrow and build, analysts at UBS argue. UBS also sees a financial twist to this bearish macro dynamic.

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In the go-go days, raw material prices got a boost from the rampant shadow banking system and a debt orgy in Western economies, which drove speculative capital into commodity-hungry emerging markets. Now that this structural support has fallen away, more quantitative easing by Western central banks may be the only thing left to prop up prices if fresh Chinese stimulus falls short. Even then, the boost would probably only be temporary.

The big, diversified miners can probably afford to take the long view. Ongoing mass urbanization should ensure reasonable demand for raw materials over the next decade or two. Miners can still tweak capital budgets to adjust to changes in the timing of demand growth and the potential impact of lower prices on the economics of new projects.

For investors, a lot of pain is arguably priced in. A recent de-rating has left BHP Billiton and Rio Tinto trading near the low end of their 10-year enterprise multiple range. Reuters consensus estimates already imply double-digit earnings declines this year for both BHP and Rio, with growth resuming next year. But after a decade of super-normal profits, more than humdrum growth will be needed to reverse the sector's recent underperformance.

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