Mining Cutbacks to Pave the Way

Source:

Mining cutbacks could pave the way for the next metals rally in two to three years.

Belt-tightening by miners as metals prices tumble could mean some projects never see the light of day, leaving supply lagging once demand picks up and paving the way for the next metals rally in two to three years.

"You could have a situation two to three years down the road where there's another commodities squeeze because companies haven't spent as much as they should've done," said Ian Morley, a director at fund manager Quantum.

Some analysts think it will take longer but either way mining majors with strong assets, such as BHP Billiton and Brazil's Vale, will be better placed than most to benefit from the upturn when it comes.

Cutbacks and deferrals of major projects could hurt copper and zinc most, said independent consultant Angus MacMillan.

"Some of the projects deferred will be gone for good. Once again we'll be short of concentrates when the economic cycle turns up," he said, referring to mine production of both metals.

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