Even MINExpo is dominated by one question: will the current US economy meltdown affect mining?
Even the thoughtful mining blogs are focused on how US economic woes will affect mining.
The reputable news channels report opinions that assure attendees mining will not be affected.
Boil it to the essence and there are but three messages in the mass of talk and reporting:
- Demand from China and India will continue strong and will keep metals mining robust.
- The US will still need electricity and that will keep coal mining expanding.
- Demand for mining equipment may fall, causing a reduction in long delivery times.
I cannot be so straight-forwardly optimistic about the China/India theory. There is something troubling about the idea that mining will continue its Supercycle performance because of two fundamentally flawed countries. A worse thought is that the resuscitation of the US economy depends on consumption in China and India. Which bad thought highlights just how flawed is the notion that miners can stop worrying because they believe in the soundness of China and India.
I do not doubt that coal will still be mined to produce electricity. But again the thought that the US economy will prosper because long trains still run the vast flat distances of Wyoming, highlights the fallacy of relying on one train to remain optimistic.
If your share portfolio includes a healthy percentage of mining equipment manufacturers, the continued demand for mining equipment is good news. If you are still waiting for equipment delivery, the reduction of waiting times, is good news. A new truck and tyres that come months earlier than anticipated may indeed boost profits and contribute to continued Supercycle good times. But buoy up a whole economy; that is an absurd idea.
There are a reported 40,000 people at MINExpo. In spite of this impressive attendance, the mining industry is but a small part of the US economy. Mining is a greater part of the Canadian economy, but Canada is so sparsely populated that US economic woes soon whiplash Canada. So unless you are into uranium and potash in Saskatchewan and oil sands in Alberta, you need be careful about mining optimism based on US economics.
At dinner last night, a smart old civil engineering professor reminded me that in the 1930s, construction of roads and dams pulled them out. And he proceeded to remind me that the US infrastructure, its road and bridges and dams are in great need of upgrade. He predicted we will have to focus government funding on public works to repair our infrastructure to get the economy going again.
But as quickly as his idea lifted spirits, a dour old Scotsman opined that only a vast war got the US economy going again. He added a coda that maybe the war on terror and Iraq and Afghanistan and maybe one or two more against Pakistan and North Korea could set us straight again.
The liberal lady butted in with the observation that these ideas are the product of drunken old men recycling the lessons of the past to new issues that demand a new approach. She called for spending to finally clean up the environment, to build new clean power plants, and to fund public housing to take the homeless off the streets. And she added all this will be good for mining. But my concentration slipped away into a glass of port as the details of this proposition were debated.
My point this sober morning is that nobody knows. It is all too complex for one man or woman to understand or to rectify. And with this morning’s revelations that the FBI has launched investigations of criminal wrongdoings at so many of the failed firms, we can only wonder if the current mess is not simply the inevitable end-product of a system that glorified excess and condoned criminal performance. When government is for & by big business and big people’s profit, the average miner can do no more than rue his past voting record, put his hard hat on, work harder, and spend less. And hope like hell the Chinese and indians continue to consume.