CAPE TOWN (miningweekly.com) – Politics was shaping the world mineral supply and mercantilism – an economic doctrine which encourages each country to fend for itself – was rearing its head, DaiEcon Advisors principal Dr David Humphries said on Monday.
Humphries told the Investing In African Mining Indaba that investors were feeling short-changed and analysts were expecting capital investment in mining to be constrained in 2013 as a result.
“We’re looking down the barrel of a new mercantilism and markets that are inherently more political,” he said.
That was the trend despite shareholders being the group that had come out of the minerals boom worst owing to their limited leverage, and governments coming out of it best.
There had been a structural shift in global supply with politics forcing cross-border investment to contend with lower grade minerals and less efficient returns.
Historically, mineral production and consumption had taken place in the same countries, which provided a clear self-interest in mining development.
But the overlap was diminishing as a result of growth in demand coming from countries without a producer base, which was polarising mineral supply and halving the proportion of local supply coming from consuming countries.
That polarisation of supply was undermining the natural coexistence of interests where the major producers and consumers owned the same country.
It was also resulting in the politicisation of production and States taking steps to direct the use of minerals toward national economic development.
That securitisation of consumption was giving rise to conflict between nations.
Producing countries were becoming more assertive, without State ownership being emphasised.
In Russia, while the State had become directly involved in oil and gas, it had not found it necessary to become directly involved in the mining sector.
However, the nonrenewable nature of minerals was leading to a use of export restrictions and requirements for local beneficiation and domestic value addition.
Although the World Trade Organisation had last year found against China’s imposition of export restrictions on a group of nine minerals, the issue of countries wanting to take more control over their own minerals was continuing to arise.