Mine-Spending Reductions Seen Limiting Global Surplus of MetalsJoe Richter
Supply gluts in metals including copper and nickel may be limited as mining companies trim investments in production expansion after prices declined this year, according to Standard Life Investments Ltd.
“Quite a few of the miners have cut back sharply on capital spending, and that should bring things more into balance,” said Frances Hudson, who helps oversee about $290.8 billion as the Edinburgh-based strategist at Standard Life. Gains in Chinese and U.S. demand may also help soak up excess supplies, she said.
The world’s top four mining companies will reduce capital spending by 10 percent this year, Bloomberg Industries analyst Barbara Pomfret said in a Nov. 14 report. The London Metal Exchange Index of six industrial materials slumped 12 percent in 2013 on signs of ample supplies.
Global production will top demand for aluminum, nickel and zinc this year, Barclays Plc forecast in a report Oct. 31. Annual spending by the top 20 miners including BHP Billiton Ltd. will drop by about a third to $66 billion in 2015 from 2012 levels, according to forecasts compiled by Bloomberg.
The Bloomberg World Mining index jumped 14 percent from a four-year low in July as signs of sustained global growth eased supply concerns. The MSCI All-Country World Index of shares climbed 11 percent in the same time, while the Standard & Poor’s GSCI Spot Index of 24 commodities declined 3.3 percent.
Glencore Xstrata Plc Chief Executive Officer Ivan Glasenberg said in August that mining peers responded to his call six months earlier to curb spending and shelve expansions to buoy resource prices and returns for investors. “CEOs are now under pressure from shareholders and they are doing the right thing,” he said.
A dearth of new mining projects may help spur a rebound for metals including zinc, Victor Wyprysky, the chief executive officer of Chieftain Metals Corp, said this week.
“Increasingly, the experts seem to think zinc has potential for a strong growth in prices,” Wyprysky said.