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The Base Metals Industry Achieved Robust Growth in 2010 and 2011
Despite continuing financial and economic uncertainty impacting the global economy, the base metals industry achieved robust growth in 2010 and 2011, in both developed and developing countries.
Worldwide production of base metals continued to increase, mostly due to increases in production from Canada, Mexico, Venezuela, China, and India. Growth in these countries offset production losses in areas such as Indonesia, South Korea and the US. Base metal production in Brazil stopped falling, growing for the first time since 2008. China remained the leading base metal producing nation, followed by Chile.
The global market expanded by 15.3% in 2011, to reach a value of $167.2 billion, indicating a compound annual rate of change (CARC) of -0.5% for the period 2007-2011.
Growth in this period was primarily driven by the copper segment, which generated 62.8% of the global industry value in 2011. Prices of all base metals rose in 2011, with considerable price increases of lead, copper, and tin. However, the fragility of the global economic outlook looks set to take its toll with price reductions expected for lead, copper, and nickel.
Global base metal production increased by 3.1% in 2011, to reach a volume of 26.4 million metric tons, representing a compound annual growth rate (CAGR) of 1.7% for the 2007-2011 period. Growth in base metal production was driven by increases in Canada, Mexico, Venezuela, China, and India.
The metal industry globally is cyclical and highly competitive. Metal producers are subject to cyclical fluctuations in prices, set through the London Metal Exchange (LME). The industry is also affected by general economic conditions and end-use markets.
The profitability of mining companies depends on the volume of production and operating efficiency. Large companies, with vast financial muscle, are able to develop new deposits and therefore boost their reserves and profitability.
Important growth strategies for mining companies are mergers and acquisitions (M&A). In 2009, experiencing the impact of the global economic downturn, the focus of mining companies tended to shift from business expansion to survival, resulting in less M&A activities than seen historically. However, 2010 and 2011 saw a surge in mining deals yet again, due to factors such as a rise in commodity prices, economic recovery, and demand in developing markets.