‹ Minerals

Weak commodities

November 05, 2013

The northern economy depends on resource development to achieve high economic growth. Yet for the past two plus years commodities have been hammered. For northern projects it means tough slogging.

Dr. Ed Yardeni notes that “The commodity index was highly correlated with the production index from 2001-2011 during the so-called “commodity super-cycle. It was super, but it was short, lasting only 10 years. Lots of capital was invested to increase the supplies of industrial commodities. It paid off in more supplies, but weaker prices. Even the recent weakness of the dollar doesn’t seem to be lifting commodity prices as it did in the past.”

One obvious impact of lower commodities has been a lower $Cdn, now trading at $0.96 in spite of a much better fiscal position in Canada.

Looking at the commodity sectors in the north—there have been a few impacts:


Low commodity prices have continued even though there are signs of a tepid recovery in the US. The technological revolution with fracking and horizontal drilling have driven down the price of natural gas. Metals prices have put the squeeze on equity markets making it hard for small-medium players to attract capital. The pressure on project proponents to keep costs down will remain.



Source: Yardeni.com