Michael Amm comments on the pace of outbound investment in China in The Globe and Mail

The Chinese Resource Supercycle Slows Down

May 26, 2012

The ripple effects from China’s slowing economic growth are being felt from Beijing to British Columbia. At risk is a nearly decade-long run of unquenchable demand and high prices for a range of metals and other commodities, powered by relentless spending on homes, office towers, and transportation and communications infrastructure across China.

China’s big build is maturing as capacity catches up with demand, even leaving entire residential and retail complexes nearly vacant due to a lack of buyers. That is beginning to backfire through parts of the global commodities supply chain that has fed China for the past decade.

For the global mining industry, the worry is that the supercycle is ending.

Booms and busts have always been a natural reality of the mining industry. The past decade, however, earned the industry buzzword "supercycle" for the unusually long run of demand and strong prices for metals, attributable in great part to China’s unstoppable growth.

Canadian resource companies – some of the world’s largest – were made richer with each pound of copper, zinc, nickel, iron ore and steel-making coal that China consumed. Today, though, investors are spooked by falling demand and mining shares have nosedived.

"Certainly we've seen Chinese activity has been slower, for sure," said Michael Amm. "They’re still out there, they are still doing things, but the pace is lower, and that was driving a lot of the exuberance and bidding up a lot of the prices."

Read the full article here.


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