News

January 03, 2009

Only Five Risers Overall, And Most Of The Rest Lost A Lot: That Was The Year That Was ... In London

By Our London Correspondent

2008 was an extraordinary year in London’s stock market for a whole host of reasons, but possibly the overwhelming impression the year left us with was the speed and intensity with which the global economy went from boom to bust. Mining was particularly geared to the boom, with the “perfect storm” of seemingly unstoppable growth in demand for mined products combined with severe constraints in increasing supply leading to record commodity prices almost across the board. At the same time, massive problems with the developed world’s banking sector were emerging, but these were brushed aside by the belief in the extraordinary growth projections coming out of China – the Chinese economy was thought to be largely de-coupled from the developed world and its growth was said to have been invincible, driven by a billion people enjoying disposable wealth for the first time. Holding this view turned out to be unwise.

For the miners, the situation at the end of 2008 is that no-one wants any of their products, with the notable exception of gold. Commodity prices have collapsed to a point well below the marginal cost of production for all but the most robust mines and will stay collapsed until the stocks of already-mined material have been used. Stockpiles have risen to the point where those commodities which are sold directly to manufacturers – for instance ferrochrome and cobalt – have seen trading volumes...