Wednesday, January 21, 2009

 

Bad News for Mining

I previously observed that blast furnace shutdowns were bad news for the industrial economy. Farther upstream, it is the miners who extract the iron ore fed into blast furnaces, as well as all the other minerals important to industrial civilization. But now the global business downturn has reached the miners as well, and this is starting to have a devastating effect on them and their industry. A portfolio manager specializing in mining is quoted as saying, “A lot of the communities are remote so that when (mines) do shut down, the town actually collapses.” It’s just like the post-gold rush days in the US. Apparently coal mining is suffering in the same way. So we have a situation in which a lot less coal and a lot less iron ore are being fed into fewer operating blast furnaces. And indeed, steel output is dropping all over the world. Japan, for instance, has experienced the biggest drop in 60 years. Worldwide, steel production in November 2008 had declined 19% from the same time in 2007.

As the mining industry is at the upstream end of industrial production, this shows that the implosion in consumption on the far downstream end is already having a heavy impact all the way up at the top of the chain. About the number of miners affected, the article says:
There are no reliable employment numbers available for the mining industry globally because it spans such a broad geographic, economic and political spectrum, but it is clear that the number of jobs already lost is vast.
Here is a situation that bears close scrutiny, for it is highly indicative of what’s happening to the industrial economy.



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