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North America Mining Sectors : A Company and Industry Analysis (June 2008)
Mergent, June 2008, Pages: 32
This report updates the previous North American mining report, focusing on the markets in Canada and the United States
Current Environment - Key Points
- In the first quarter of 2008, rising global commodities prices drove the mining market, despite the poor economic environment in the US and the slowing global economy
In March 2008, the Producer Price Index (PPI) for all US mining industries (excluding oil and gas) was 175.6 index points, up by 14.2% from its previous year level of 150.7
- In the fourth quarter of 2007, the US coal industry faced a drop in production and imports, but a rise in consumption, exports and inventories over the comparable quarter of 2006
- During the six months ended March 31, 2008, the share prices of most US metals and mining companies were affected by investor concern that the US was slipping into recession, and that demand for metals, especially copper, would dwindle as the country's housing slump deepened
- In response to inflation fears in the US, combined with the weakening of the US dollar, prices for primary metal products in Canada rose 9.2% in the first quarter of 2008, compared with 6.2% in the comparable quarter of 2007
- Most Canadian mining companies posted lower earnings due to lower average realized prices and the negative impact of the stronger Canadian dollar relative to the US dollar
Industry Profile - Key Points
- The estimated value of US metals mined in 2007 was US$24.8 billion, up 5.5% from the 2006 figure of US$23.5 billion
- The value of US raw and processed mineral material exports for 2007 rose 42% to US$105 billion, while import values were up 11.3% to US$148 billion from the 2006 level of US$133 billion
- The value of US raw and processed mineral material exports rose 27% to approximately US$74 billion in 2006, while import values increased 28% from the 2005 level to US$138 billion
- US coal production for the whole of 2007 was approximately 1.15 trillion tons, a decrease of 1.5%, or 17.2 million tons from the 2006 record level of 1.16 trillion tons, due to the drop in the Appalachian region's production levels
- Canadian mineral production in 2007 was worth C$40.4 billion (US$40.1 billion), a 19% increase from 2006
- Canadian mine exploration expenditures for 2007 totaled C$2.6 billion (US$2.58 billion), up 34% from C$1.9 billion (US$1.89 billion) in 2006
Market Trends and Outlook - Key Points
- With half the country's electricity produced from coal, a boost in coal prices could indicate even higher electricity prices for consumers
- New uranium mining legislation passed in Colorado outlines new standards and environmental protection requirements but critics say it is the most restrictive legislation of its kind in the US
- While domestic copper demand has been affected by the weak residential housing market, declining US automobile sales, and a wider use of plastics in US plumbing applications, the world's largest publicly traded copper company, Freeport-McMoran, remains optimistic about the metal's outlook
- A three year ban on uranium mining in northern Labrador's Central Mineral Belt may delay uranium production in Canada even though it is not expected to delay exploration itself
- The country's mining sector is facing worsening shortfalls of skilled workers
- Among all the provinces in Canada in 2008, only Saskatchewan is likely to enjoy a good year for exports
- Although the Canadian mining sector is not immune to the US economic turmoil, declining inventories and growing demand from foreign countries, especially China, could actually benefit the larger players in the country.
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