When we reach the end of the year and it’s time to look back and review what has been happening, the starting point is always to look at one’s own predictions, made in a flurry of enthusiasm in late December/early January.
Then you have to decide whether or not to mention them again, or whether the cellar doors of history should be kept firmly closed.
In other words, how right or wrong were they?
This time last year, I didn’t comment too much on prices, because that’s really the job of the analysts, but I did make the passing comment that the $12,000 copper put forward by at least one of those analysts was not going to happen; as I’ve seen that one raising its head again recently – albeit only the once, for now – I’ll repeat the same prediction: we won’t see it in 2014, either, even though the world seems to be stuttering towards a recovery.
The great tax row still awaits
One thing I did predict – which hasn’t as yet come to pass – was that the arguments (particularly in the UK) about transnational corporations and their tax strategies in the various jurisdictions in which they operate would spread to hit the mining sector. It hasn’t happened, but, interestingly, the debate has raged about energy companies and their transfer price/profit margins/retail prices.
This is, in a way, part of the same argument, constructed to examine the way in which natural resources are priced at the point of consumption.
Now, with hindsight, it is pretty obvious that energy – gas, oil, coal and the electricity they generate – would be closer to the action that mined minerals, simply because they translate more directly into a cost for the consumer’s pocket, and therefore speak louder in political terms. My timing was clearly out on this one, but I don’t believe the debate is over; resource companies (and not just those producing energy) will be dragged further into this fight, and politicians, keen to garner votes, will make a big play.
The difficulty, of course, as I alluded to in a recent article, is that rising metal prices are not necessarily going to result in higher margins for the miners. It promises to be an acrimonious debate.
I also made a fairly safe comment that Chinese growth would likely not be as rapid as generally predicted. Well, I probably stand by that, although the truth is so veiled in the mists of the figures put out by China’s authorities that, in reality, we probably don’t have much of an accurate view of what’s going on there.
Metals bid goodbye to some big banks
One other issue I raised as likely to be significant during the year was my suggestion that the big banks’ dominance of metal trading was on the wane. There I think I was proved right, with the departure of a number of players and sharp cutbacks from others. The headline name, at least at this end of the year, was, of course, Deutsche Bank, deciding just before Christmas to exit metal trading.
From the outside, it’s obviously difficult to know what really triggered that move, but I would suggest the combination of a changing regulatory environment and the furore surrounding the warehousing business.
Deutsche is known to have been a big player in metal financing and – although undoubtedly playing completely within the rules – the threat of everyone and his wife throwing lawsuits around for years to come would be enough to make anybody lose the will to live. They probably simply felt they had had a good business, but its time was done. It’s true that some new banks have expressed an interest in joining the business, but, with all due respect, the leavers somehow outweigh the putative joiners.
And that was pretty much it for my predictions; I’d probably award myself a middle-of-the-road beta plus – certainly no more, because there was nothing too unconventional about them, but probably no less, because mostly they were right(ish).
And so to 2014; well, we’ll have a look at that another time.
Lord Copper
editorial@metalbulletin.com
