Mining firms have put on a brave face over the past 18 months. I warned last year that the super-cycle had popped, despite the largess still being exhibited by the industry in the mining hub of Perth.
Since then, billions of dollars have been extracted from cost savings, economies of scale are being wielded to force out competition, and non-core divestments are in full swing. But the brutal actions of mining companies cannot reverse a cyclical downturn brought on by China's cooling property market.
Stabilizing growth rates in Asia and small interest rate hikes next year in the U.S. and U.K. should revive interest in cyclical sectors. Unfortunately, commodities like iron ore may offer little more than a value trap.
"The iron ore price may have found a bottom for now, but it will take another leg down next year," said UBS's Wayne Gordon. He believes that mainland China holds the key to its fortunes. "China is still the main game in emerging markets and we are in structural oversupply for the next few years."