Although prospects for the mining industry have improved from a year ago, its most recent gains remain precarious. Some observers assert that the demand for metals from China and other developing countries is returning and will remain strong, with the effects of the global economic slowdown having only temporary effect. Rio Tinto estimates that global demand for commodities will double over 15 to 20 years. Other experts note that it is hard to judge what is driving the current demand for metals in China and, consequently, such demand is unsustainable and could be the result of speculation or one-time stimulus spending. Also, metal inventories are rising, indicating an end to restocking, yet prices also continue to increase, setting up metal prices and stock prices for a possible correction. In response to the uncertainty, mining firms continue to cut costs, limiting the development and exploration of much-needed new mines. However, supply constraints would benefit such companies. For now, copper shows the best prospects and aluminum has the worst.

Source: Financial Times