>>> I don't understand how commodity prices are going to go back up<<<
See the two article snippets below. (The copper one was posted earlier.) Lather rinse repeat about 500 times. See Rogers FT interview at this link:
ft.com
Scroll down to the Rogers interview from 11/17. I think he discusses deflation in Part IV. Whole interview is worth it.
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Alcoa Searches for Fresh Start in Troubled Market
Aluminum Maker Takes Measures to Reduce Costs and Could Broaden Its Ties With Chinese Partner Chinalco
By ROBERT GUY MATTHEWS
Alcoa Inc., which had been counting on obtaining some discarded aluminum assets from a merged BHP Billiton and Rio Tinto PLC, has fewer strong options to improve its prospects amid one of the worst aluminum markets in decades now that the deal has collapsed.
With aluminum inventories just shy of record levels, prices at their lowest level in 2008 and nearly half of the world's aluminum production unprofitable, Alcoa is scrambling to cut capacity and find buyers for some of its downstream businesses, which is proving more difficult given the tight capital markets and reluctance of many companies to take on debt.
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Freeport to Cut Copper Production as Prices Fall
By KEVIN KINGSBURY
Freeport McMoRan Copper & Gold Inc. cut projected copper production and sales for the next two years as it plans to halve estimated 2009 capital spending and suspend its dividend amid the plunging prices for copper and molybdenum.
The company said the pricing slump and economic and credit-market woes will limit its ability to invest in growth projects and result in Freeport changing near-term plans. As such, the company will preserve liquidity while holding on to assets it sees driving long-term results.
Beyond cutting expected 2009 capital spending by 52% to $1.1 billion as it puts off development and expansion at several mines, Freeport said suspending its $2 annual dividend will save it some $755 million a year. The company hopes to reinstate it "as market conditions improve." Capital spending this year is slated to be $2.7 billion.
Copper futures have tumbled some 60% since hitting record highs in May as demand has fallen amid the slowed global economy. Miners have numerous metals have announced plans of late to curb planned production in response to price declines.
Copper in particular has been a big beneficiary of emerging-market growth, most notably in China, for most of this decade. The metal became so attractive to some that thieves in the U.S. would break into vacant buildings to steal copper wiring and pipes for later sale.
Molybdenum, which gives steel its strength, has also been subject to sinking prices as steel demand slumps. Freeport noted prices fell from nearly $30 a pound in mid-October to $9 on Monday.
Freeport cut its copper-sales estimates for the next two years by 4.7% and 11% respectively, resulting in little expected growth from 2008 levels. No growth for molybdenum sales is expected, versus prior expectations of 8.1% and 25%, respectively, for 2009 and 2010. The company also cut its six-week-old view for this year's molybdenum sales by 2.7%.
Freeport shares closed Tuesday at $21.82 and there was no premarket trading. The stock is down 79% this year. |
