Miners are on the downswing but the sky has not fallen yet

 
Marc Sidwell
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A GLOOMY day for miners across the board yesterday, with shares in ENRC, Xstrata and BHP Billiton all falling and the UK mining index down again, taking it 12 per cent down over the year to date, while the FTSE 100 index has risen nine per cent overall.

If you are looking for a light at the end of this tunnel, watch out: it may be an oncoming train. The talk is of the end to the latest commodity supercycle. China’s demand for raw materials is slackening, and the resulting oversupply is putting downward pressure on prices for the foreseeable future.

So much we knew already. In some respects, the weak performance of miners this year is because of the price falls that can be seen heading towards them as the year goes on.

What helped the slide yesterday was the bearish voice of Credit Suisse adding to the bearish mood. Its latest note on metals and mining sees downside risk to prices in the second half of 2013 and cuts its earnings estimates across the sector.

The largest cuts are to coal and copper and, in equities, to Anglo American, Antofagasta, Kazakhmys and Vedanta. Rio Tinto on the other hand gets identified as a rare bright spot, with a clear plan for improving cash flows and volumes.

Yet it could be worse. The bottom is falling out of China’s boom, but precious metals aren’t dropping from the sky. However, they could be soon if some entrepreneurs have their way. Asteroid miners like Planetary Resources are looking to space for future profits, and just one asteroid can contain more platinum than has ever been mined. The commodity supercycle is as old as history, but earthbound mining giants could yet look back on its gyrations as a golden age.