Freeport CEO Turns to Country Music as Downbeat LME Week Closesby , , and
Traditionally bullish miners hunker down for period of pain
In rough times execs cite country star, Godfather and Ghandi
After four days and nights of back-to-back meetings, downbeat seminars on the state of the market and a marathon cocktail party circuit, it fell to Richard Adkerson, chief executive officer of Freeport-McMoRan Inc., to sum up the nearly unanimous bearish sentiment of the metals and mining sector.
He turned to lyrics from a country music song made famous by Tennessee’s Rodney Atkins.
“If you’re going through hell, keep on moving,” he told a throng of mining executives, traders and bankers attending his company’s annual party on Wednesday, traditionally the final social event of London Metal Exchange week.
“Don’t slow down. If you’re scared don’t show it. You might get out before the devil even knows you’re there,” Adkerson said, reeling off the lyrics of the 2006 hit from the podium in the ballroom of the Inter-Continental hotel on London’s Park Lane.
Adkerson, who runs the world’s largest publicly traded copper producer, was unique in using song, but his views matched the consensus. Four years after the current bear market started, many producers of metals including copper and aluminum said they’re are expecting a long and painful period of low prices. The reason: China, which buys about half the world’s industrial metals, is slowing down.
The chairman of Codelco, the state-owned Chilean company that is the world’s biggest copper producer, turned to director Francis Ford Coppola’s 1972 gangster film classic, The Godfather.
“How bad do you think it’s gonna be?” asked Oscar Landerretche, channeling Michael Corleone, who’s played by Al Pacino in the film.
“Pretty goddamn bad,” he said, quoting Clemenza, a gangster assassin preparing to start a mob war with a violent killing spree. “These things gotta happen every five years or so...ten years. Helps get rid of the bad blood.”
Downturns in metals markets help “clean the bad blood” bred by enthusiastic boom years, said Landerretche in a dinner speech on Tuesday.
Miners including Glencore Plc, Freeport and Codelco are cutting costs, reducing output or labor in response to the commodities rout. Glencore last week said it would slash its zinc output by a third having already announced shutdowns of copper mines in Zambia and the Democratic Republic of Congo.
Freeport announced plans in August to cut about 10 percent of its staff and contractors at U.S. mining operations and is prepared to cut more, Javier Targhetta, senior vice president marketing & sales said in an interview this week.
Landerretche also paraphrased Gandhi’s list of “seven social sins” to create a version adopted for the mining sector. These sins included “profits without productivity,” “budgeting without restraint” and “operating without thrift,” he said, describing the mistakes and excesses committed by mining companies during the boom between 2001 and 2010 when metal prices rose to record levels.
Copper prices are down 48 percent from reaching a record $10,190 a ton in 2011.
The last decade of high prices is “not the norm,” and the current downturn is likely to reshape the industry Jean-Sebastien Jacques, copper CEO at Rio Tinto Group, said at the Bloomberg Intelligence LME Week forum on October 14.
“We are, no doubt, facing tough times. It feels a little like we are in a washing machine on spin cycle,” he said. “The industry compass is jammed and it’s time for a re-set."