internt'l minerals hoarding in early stages

Hi All

Just a thought about mineral prices, and how they will positively affect mining companies and explorers like Territory Resources!

Governments around the world can see that current world production of minerals essential for the developing nations like CHina and India is not enough to meet their demand, even if these existing mines are operating at full capacity.

Earlier this year the Indian govt imposed export taxes on iron ore shipments, to conserve this resource for domestic use, there are strong calls for a ban on export, which is highly unlikely, but a doubling of the iron export tax to 40% may occur in coming months.

India is the 3rd largest exporter of iron ore, so this will have an affect of redirecting shipments internally and reducing supply on the international markets. The only way export shipments will continue at current rates is if international prices rise to compensate iron ore miners for the 20% income loss to tax.

Brazil is the World's second largest exporter of iron ore. Being another developing country they also have a significant need for this resource internally. There is no word on a ban or export tax, but domestic demand is expected to rise over the next 3 years to a level where they will not have excess capacity to export iron ore, unless they significantly increase capacity.

Iron ore demand is growing at around 100Mt per annum, and this is expected to accelerate to 130-160Mt per annum and Europe and US economies grow above normal trends from 2012 onwards. It is currently sitting at 1Billion tonnes per annum, by 2015 this number will be approx 1.6Billion Tonnes of iron ore. In order to make all the different uses of steel you need, coking coal, manganese, zinc, nickel, chromium and other base metals. So demand will increase for all these products.

It wont be a lineal positive move, there will be cyclical movement with business/economic activity, but there will be a structural positive shift in the international demand curve for these products that will outweigh any short term economic fluctuation. We saw this occur in 2000, where iron ore prices ave were $30 per tonne, a structural shift occurred in the demand for the mineral, as well as others, and it rose to a new level of $60-100 per tonne, and peaked at $200 in 2008.

Going forward we will see another structural positive shift over the next 3-5 years, even with all these additional mines going live in coming years.

http://indiacurrentaffairs.org/levy-40-resource-rent-uniformity-across-mining-sector/