Production Cuts, Shelved Plans to Aid Strong Metals Price Recovery

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"The cancellation of $50 billion in mining investment this year could sow the seeds of the next bull market."

Mining output cuts and shelved investment plans are laying the foundations for a strong metals price recovery when the world eventually returns to growth, fund manager BlackRock said.

But London-based Evy Hambro, managing director at BlackRock, said that until the global economy starts to respond to large fiscal and monetary stimuli, prices of industrial metals will stay near the marginal or highest costs of production.

"When demand recovers will be dictated by how quickly all that money feeds through. . .When you get prices trading around the marginal cost of supply, you are at the level where prices start to stabilize," he told Reuters last week.

"Over $50 billion of mining investment has been cancelled for this year 2009, 66% of all capital expenditure scheduled for the mining space this year. That sows the seeds of the next bull market."

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