Playing Chicken with Mine Supplies

John Robertson

PortfolioDirect

Raw material users appear to be playing chicken with their supply sources. Mining companies (including new mine developers) are constantly displaying charts showing demand outstripping supply through the late 2010s and beyond. These forecasts imply good times ahead but also a perplexing refusal of end users to support needed mine capacity. Uranium is a stand-out example. Despite known sources of demand, utilities are coy about funding new developments. Similarly, Elon Musk at Tesla apparently has no contracts for lithium despite his aim to have lithium batteries in every home. Rare earth materials is another space where future expectations of burgeoning demand do not depend on a GDP forecast. In each case, mined material is such a low proportion of the cost of a final product that the risk of failing to have enough hardly seems worth taking. Add tin for use in electronic componentry to the list. End users may be encouraging as many potential suppliers as possible to tilt the negotiating balance in their favour before choosing but they will have to move eventually if the forecasts are right.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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