Monday, November 3, 2008

Chinese demand will continue to support mining sector growth

The slowdown in global economic growth does not imply the that the mining industry will suffer the same malaise, diversified miner African Rainbow Minerals (Arm) argued on Wednesday.

Demand would continue to be supported by the "massive industrialisation of China", albeit at a slightly slower rate, which would ensure the long-term viability of the mining sector, the company affirmed in a presentation on its website.

Despite recent margin pressure, Arm was confident that it would remain well positioned, owing to its commodity mix, long-life low-cost operations, and its future projects and expansion prospects.

The company will spend an estimated R4,2-billion on capital expenditure (capex) on expanding a number of projects in 2009.

It will spend a further estimated R4,83-billion on capex in 2010 and an estimated amount of R3,8-billion in 2011.

SUPPLY TRENDS

While the general commodity outlook remained positive, Arm business development executive director Stompie Shiels noted that nickel prices would remain under pressure for the foreseeable future, as the nickel market was likely to move into a sustained surplus from 2009 onwards.

He said that this was owing to the start up of a number of new nickel projects, while it was expected that there would also be no immediate recovery in austenitic ratios.

However, the high-carbon ferrochrome market was expected to move into a deficit in 2009 and 2010, as power-related constraints on South African production would continue.

There was also a growing demand for ferrochrome from a "resurgent" stainless sector.

Shiels said China would need to import about 13,5-million tons of chrome ore by 2012, of which six-million tons would come from South Africa.

South Africa, as the largest single source of chrome ore, produced 8,8-million tons in 2007, which was estimated to increase to 10,4-million tons in 2008 and 13,7-million tons by 2012.

However, the global demand from the stainless steel and ferrochrome industries was likely to reach 36,59-million tons by 2012.