Ann: Additional semi coking, magnesium and tar oi, page-8

re: Ann: Additional semi coking, magnesium an... Sydney Morning Herald – July 20, 2013

Orica was Friday’s high-profile casualty of the resources sector slowdown as its share price slumped in the wake of a profit downgrade, but the resources ”super cycle” isn’t dead. It’s just having a lie down, like a toddler that’s recovering from a sugar overdose.

The commodity price bubble that accompanied China’s infrastructure investment boom won’t be repeated. When China’s demand for commodities surged a decade ago, the miners had been closing down mines and cutting exploration and development for decades. Today China is growing more slowly and in a different way, and the supply pipeline is larger.

The trend that Goldman Sachs global research head Jim O’Neill highlighted in 2001 when he first predicted the rise of the BRICs – Brazil, Russia, India and China – is far from over, though. It’s difficult now to appreciate just how revolutionary was O’Neill’s prediction that emerging nations, and China in particular, would become powerhouses when it was made. He exposed a huge emerging market dynamic, one that dominated economic management in Australia as it played out.

With the benefit of hindsight, it seems O’Neill and Goldman underestimated China’s impact. China has consumed more steel in the past decade than it did in the previous 60 years, and its share of global iron ore consumption has risen from 20 per cent to 56 per cent. Its share of consumption of coal used for steel making has risen from 20 per cent to 57 per cent in a decade, its consumption of nickel is up from 9 per cent to 41 per cent, and its consumption of other commodities shows similarly stellar increases.

O’Neill’s BRIC hypothesis created two related and highly influential market mantras. The first was that the BRICs were seeding a resources ”super cycle” as they expanded – and as supply-side bottlenecks developed. The second was that the super cycle would be super not just in price, but in duration: commodity prices would be ”stronger for longer”.