Investment capital flows when prices are high, but companies scale back investments when they fall. Nonetheless, companies do not often abandon projects once underway; in part, this is a natural resistance to writing-off an existing investment, but experienced businessmen also know that markets are cyclical. If companies wish to ‘cash in’ when prices are high, they must have installed capacity in order to ramp up production when the price is right. The prices of industrial minerals were at historical lows prior to 2000 but increased dramatically through the next two decades as China began its unprecedented build-out of infrastructure as it transitioned from an emerging economy into a global superpower. The demand for industrial minerals was mirrored by increased demand for oil and gas at a time when supplies were constrained by war and geopolitics. Coincidentally, the price of gold quadrupled due to fiscal and monetary policies in the United States partially resulting from the credit crisis of 2008. This trifecta of market conditions favoured expansion of the mineral sector across the Pan Amazon, which saw revenues increase by 500% between 2000 and 2013. Following the fall of commodity prices in 2014, most companies scaled back their investment strategies. Chinese companies were the exception; they were flush with cash and responded to a management philosophy that considers the strategic interest of the state. They have since scaled-back investments, presumably due to reduced demand in China linked to policies to slow infrastructure development. Because mineral commodity markets are volatile, companies will…This article was originally published on Mongabay
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