Copper could lead recovery in metal prices, world mining
2001-06-14 10:15 (New York)
conference
told
TORONTO, June 14 /CNW/ - Whether the U.S. economy escapes with a 'hard
landing' or suffers a full-blown recession is mostly academic to metal
producers, the PricewaterhouseCoopers Global Metals & Mining Conference heard
here today.
Industrial production has been falling for nine months, Dr. David Gulley,
senior metals economist at PricewaterhouseCoopers LLP, told the conference,
with significant impact on manufacturing - a key metals user. Fortunately,
Gulley observed, some mainstays of metals demand such as light vehicle sales
and home construction continue to resist the downward trend.
"Automobiles and housing are both softening - but not alarmingly so,"
Gulley told the conference. "Both sectors are influenced by macroeconomic
trends, of course, but both are also subject to their own industry dynamics."
Automobile manufacturers have utilized retail incentives, cut-rate financing
and expanded fleet sales to keep plants operating, he said, while housing
construction has been driven by favourable interest rates. Both industries are
major consumers of metals.
This resilience, together with the Federal Reserve's aggressive rate
cuts, suggests that metal prices may be headed for a recovery. According to
the latest poll of analysts and producers conducted by PricewaterhouseCoopers,
the outlook for metals for the four quarters beginning in July is guardedly
optimistic:
- Gold, rising to $275 per ounce
- Silver, improving to $4.50 per ounce
- Zinc, recovering to $0.52 per pound
- Platinum, recovering to $600 per ounce
- Palladium, down to $650 per ounce, and
- Copper, up at $0.88 per pound.
(All prices in U.S. dollars.)
According to Gulley, history suggests copper will be the first metal to
recover from the downturn, given the sensitivity of copper demand to interest
rate cuts and monetary loosening. Aluminum is also likely to benefit fairly
early. The economy will turn supportive for these metals prices, even if
energy-saving cuts in production capacity fail to alter market conditions.
Gold, currently languishing near long-term lows, was an early indicator
of excessive monetary tightening in the U.S., said Gulley. While most analysts
have assumed that current problems with the U.S. economy were caused last year
by the Federal Reserve turning the screw one time too many, Gulley suggests
that the problem originally began earlier, with a premature shift from a
neutral policy bias to one of tightening.
But Gulley also warned that gold's problems are partly structural. After
1997, the demand for gold as measured by the total dollars actually spent on
the metal has significantly declined. "It is only because we tend to measure
gold demand in terms of ounces, rather than in terms of revenues, that the
industry has failed to take proper note of this troubling development," Gulley
observed. "The bad news is that gold demand has slid back to levels last seen
around 1990, and the good news is that we know from experience that gold
demand can be sustained at much higher levels, as was the case in the mid
1990s."
The conference also heard how South America has become the hottest region
for mining among emerging economies, including how nations such as Chile,
Argentina and Brazil have set policies that have made them desirable
destinations for mining investment.
"Every major mining jurisdiction in the world is represented here," said
Hugh Cameron, leader of the world mining group for PricewaterhouseCoopers.
"Australia, South Africa, the U.S., Canada, South America, the U.K. - this is
a representative sample of the world mining and metals business."
The PricewaterhouseCoopers Global Metals & Mining Conference, entitled
Sustainability in the 21st Century: New definitions, new demands, new
realities, brings together senior industry leaders with the
PricewaterhouseCoopers world mining group to examine the future of the
industry and the trends that are shaping it. The conference concludes June 15.
PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest
professional services organisation. Drawing on the knowledge and skills of
more than 150,000 people in 150 countries, we help our clients solve complex
business problems and measurably enhance their ability to build value, manage
risk and improve performance in an Internet-enabled world.
PricewaterhouseCoopers refers to the member firms of the worldwide
PricewaterhouseCoopers organisation.
Note to editors: The name PricewaterhouseCoopers is one word, with upper
case P, upper case C and all other letters in lower case.
-0- 06/14/2001
/For further information: Susan MacDonald/Shelby Sturrock, MacDonald &
Co., 1-416-975-1572, press.contact(at)ca.pwcglobal.com/ |
