Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Copper moved back into a bear market with a sharp decline on Thursday with year to date losses now topping 20%.
On Thursday in New York trade December copper gave up 3.1% hitting a day low of $2.2505 a pound ($4,960 a tonne). In August copper fell to a six year low of $4,888 a tonne.
The red metal’s latest leg down is blamed on worse-than-expected manufacturing data from Germany, the world’s third largest exporter. Shipments from the country are dominated by vehicles, machinery, electrical equipment and chemicals.
The Wall Street Journal reports manufacturing orders in the third quarter were down 2.8% from the prior three months despite a slight rise in domestic demand.
What shook copper traders was numbers showing orders from outside the eurozone slumping 8.6% as a slowdown in China and recessions in other key emerging markets hurt demand:
“Heartfelt groan,” said Carsten Brzeski, economist at ING Bank in Frankfurt, in response to the data. “Our positive take on the German industry got some scratches,” he added.
Dirk Schumacher, the chief German economist at Goldman Sachs in Frankfurt, said that the drop in orders was “too pronounced to be ignored.”
The release of top consumer China’s commodity-friendly five-year plan and a stronger-than-expected reading of Chinese manufacturing activity have not been able to lift sentiment among copper miners despite predictions of a market deficit next year as disruptions, project delays and production cuts in key producing regions keep a lid on supply growth.
Shares in Anglo American, down 8%, hit their lowest level since listing in London in 1999. Other copper miners also pulled back with Freeport McMoran losing 4.5%, Newmont Mining giving up 7.9% and Canada’s Teck Resources slumping 4.3% on North American markets.
Research by GFMS Thomson Reuters released in October shows nearly half of all copper miners losing money at the August low below $5,000 on a all-in sustaining cost basis. That despite the positive effects of depreciating currencies in many producing countries and cost-savings brought about lower oil prices.
Image by digital cat
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