Despite the considerable fall in global commodity prices, supply side volumes have been slow to respond. Of the major commodities we track, only coal has seen an absolute reduction in volumes over the past three years. The lack of mine closures in the face of falling prices is not a new phenomenon. In fact, during 4 of the past 5 commodity price downturns supply volumes went up, despite prices falling (1979 oil crisis was the exception). With oversupply issues driving prices lower likely to continue for the medium term, we reiterate our bearish view on the mining sector.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
