Readers of this morning’s Sydney Morning Herald may have been shocked to learn from Peter Costello that the mining boom is as good as over. But how accurate is that statement? And why haven’t we heard about this before now? Crikey has tested the Treasurer’s assessment with a panel of experts:
Richard Campbell, energy specialist Senior Client Adviser at Bell Potter Securities. You can’t simplify the economics like that. On those grounds, it’s a ridiculous statement. It’s so puerile, it’s almost shaming to think that the Treasurer would be unaware of those finer details. I don’t think anyone can really say anything like it’s over. The questions is when it will moderate? I’ve just come back from China and I couldn’t see any slackening of the boom. The general view for brokers is that there will be some moderations, but you need to distinguish between commodities. Wheat may go higher, Oil may be higher. There must be some moderating in prices when supply catches up, but overall, the outlook is fairly solid.
Tobin Gorey, commodities strategist, Commonwealth Bank. The way I interpreted it is that all good things must come to an end. While that’s right, I think it’s a fair way off. There will of course be more supply in the following years, There has been a boom in investment and output as well, and that will come to an end in time and as a response, the high process supply will also come down. So while all booms come to an end, is it stopping today? No, it’s not, but it can’t go on forever. The downturn is a fair way away, two or three years perhaps, into the future.
Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital Investors. You can’t say with any certainty that the boom is over. I think the Treasurer had another constituency there and was trying to downplay the money rolling into government coffers from the mining boom. The boom ran extremely hard into May, and there has certainly been a correction until now, but the underlying demand remains strong, based on China and other emerging markets. Chinese per capita consumption of oil, iron ore, copper and aluminium is a fraction of Australian levels, so as they get richer that demand is going to be stronger, and by most measures the supply side is still very constrained. The longer term trend is for prices to remain the same, if in fact they don’t go up.
James Kirby, Editor of the Eureka Report. I don’t think it’s over. I think that there’s a prospect that some metals may have reached a plateau, but there are signs that other metals such as uranium still have some growth left in them. But separately, mining stocks, companies and the bigger miners like BHP are in a tremendous position now because they are dealing with higher prices than they were two or three years ago. So from an investor’s point of view, it’s much too early to say that. What’s driving it is global demand, and specifically demand from China, and there’s no reason to believe that will sag soon. The balance between supply and demand hasn’t changed.
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