Shaping the mine of the future: Economic outlook

 

 

Lower for longer: the new norm

With commodity prices expected to remain depressed for the foreseeable future, mining companies need to get over the pricing shock and recognize they are part of a new norm, the era of lower-for-longer prices. Time to forget about the traditional supply and demand cycle and instead focus on a model that targets both global and local demand. 

Eventually, the combination of supply tightness and the industry’s responses will drive demand back to level, balancing the economics of mining in the coming years. This is a long-term process, and companies will need to adapt to it.

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"The drop in commodity prices has been a huge blow to our resource sector. It's weighted down the Canadian economy. Now, the issue is going to be the fact that industries need to adjust to the new reality."

— Craig Alexander, Vice President of Economic Analysis, CD Howe Institute

 

 

Oil is still king

Despite the long-term downturn, crude oil remains Canada’s largest export category. The US has been Canada’s main export destination for years, but finding alternative ways to grow the oil industry’s performance in the country might help offset the current low-price situation. 

By reinforcing ongoing export pipelines and building more channels from east to west, Canada will be able to further expand into growing markets like Asia Pacific and the Atlantic, giving the country’s economy an opportunity to grow past the American market.

"...we really do need to diversify into the faster growing markets of Asia Pacific if we want to have a healthy oil industry and all the benefits that come from it for the Canadian economy."

— Patricia Mohr, Vice President, Economics and Commodity Market Specialist, Scotiabank

 

 

 

 

"When the world economy is weak, it's really difficult for the Canadian economy to grow."

— Craig Alexander, Vice President of Economic Analysis, CD Howe Institute

Global trends setting the tone

Since Canada’s economy represents only a small piece of a much bigger global pie, its development usually depends on what’s happening worldwide. Low commodity demand in Asia, Europe and the US impacts the Canadian resource sector directly, stalling economic growth.

Once the global economy catches up with the slowdown in the mining industry and this new demand-driven standards, prices will gradually begin to improve, bringing the Canadian economy along for the ride.

 

 

 

 

 

 

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