resources demand, page-9

Published on 11 March, 2013 in Money by Anthony Fensom

Recovery underway?


Fast-forward to 2013, however, and the picture is looking rosier on the back of recovery signs in the US and Chinese economies. Stronger US jobs and housing markets along with the aversion of the threatened "fiscal cliff" have helped US stocks hit five-year highs, while China is expected to achieve 8 per cent growth in 2013 after a weak 2012.


Japan's new government has primed the pumps to drag the world's third-biggest economy out of recession, while the eurozone is expected to start a recovery in the second half of 2013.


Already, commodity prices have rebounded with the iron ore price reaching US$158 a tonne. With iron ore exports worth $63 billion to Australia in fiscal 2012, such a price could see Australia's GDP expand by up to 6 per cent this year, according to Deutsche Bank economist Adam Boyton.


Tony Fawdon, executive chairman of minerals explorer Diatreme Resources, is confident that the mining boom is far from finished.


"I was in China recently and Beijing saw the biggest development I've ever seen - probably around 50 high rises going up on the road from the airport to the city, enough to house half a million people, while down another road I saw accommodation being built for 200,000, and that was just two roads," he says. "The world is wrapped up with what's going on in Europe and America, but China hasn't slowed at all. Although China has to sell to those markets, it probably has enough internal savings to run its economy for a few years, continuing to build internally, which of course helps Australia."


Dominic Kazlauskas, director of corporate finance at resources broker Patersons, is also a mining true believer.


"Resources have underperformed [in 2012], but over time they will outperform the rest of the market given the way that society consumes our commodities," he told the Queensland Exploration Council in a recent presentation. "Things need to work themselves out in the eurozone before things really start moving. China dominates global resources demand, but India is basically the same size and they all want their mobile phones, air conditioners and cars and that's not going to stop."


Kazlauskas said financial issues in Europe and the United States had weighed on the sector, noting that the International Monetary Fund had trimmed its global growth forecast to 3.6 percent for 2013.


Emerging economies, however, are expected to average 5.3 percent growth over the same period, with China "continuing to grow above the world average".


"Is the resources boom over?" he said. "No... but I'm a believer in longer cycles and the super-cycle, particularly with India and China continuing [to grow] and representing half the world's population, and that's not going to end anytime soon."


However, Diatreme's Fawdon warned that a slowdown in the mining sector would hit hard, given the weak retail, housing, tourism and manufacturing sectors.


"If mining slows, the Australian economy would suffer extremely badly. The only thing keeping us going is mining, some agriculture, niche manufacturing and perhaps education."