The only way for commodity prices is down

The mining industry can
expect even more challenges
in the months to come as
commodity prices continue
to drop and China’s growth slows
down.
According to Mark Cutefani,
Anglo American CEO, there is no
change expected in the steep decline
of commodity prices in the near
future –especially while China’s
policy-makers try to rebalance its
economy from a heavy industry and
infrastructure development phase
towards a more sustainable and
commercial-based economy.
The sluggishness in other emerging
markets – with the exception of
India – and the slow progress in the
Eurozone along with mixed progress
in the US was not helping the
situation.
He said on the supply side industry
had itself to blame – particularly in
certain commodities.
“It’s the old story that appears
rational to an observer – that is to
adjust supply to align with decreasing
demand growth. But this may not
make sense to the
price maker who is
seeking to at least
maintain market
share and thus sees
the compelling
logic of driving
competitors out
of business and
thereby ensuring
he is the last
man or woman
standing,” he said.
According to Cutefani, the
downturn in mining commodities
would continue to have a detrimental
effect on supply chains from
Australia to China to Brazil to Africa.
“Everyone is feeling the pressure,”
he said. “There are some very difficult
choices that need to be made in the
coming months. Mining as a golden
goose has been squeezed dry.”
Cutefani stressed that there was
no relying on a
reversal of the
price slump.
“For many of
us in the industry
2016 is shaping
up as the toughest
year yet.”
He said
restructuring
and reshaping
business was going
to be a priority for
many mining houses in the next few
months.
“Repairing our balance sheets
and cash flow will be a part of the
challenge but we also face a host
of other issues – energy, water,
infrastructure, environmental
impacts – the list goes on,” he said.
“Addressing these challenges will
require innovation as we rebuild the
very nature of our companies. If we
don’t adapt we will perish. All of this
work and the challenges we face lead
many to ask if mining companies are
prepared for the future. The reality is
in the past twenty years we have not
been prepared.”
He said in the future only mining
houses quick and able to adjust
would find themselves successful.
“There is still a bumpy ride ahead.
No-one anticipated the length and
depth of this downturn, but in this
we need to see the opportuinty
and that will require that we think
differently about the future.”
INSERT
For many of us in the
industry 2016 is shaping
up as the toughest year
yet.
– Mark Cutefani