Metals & Minerals Industry Project Deferrals Increase as 2009 Approaches

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Researched by Industrial Info Resources (Sugar Land, Texas)--Because of the current economic climate and financing/credit problems, Metals & Minerals companies in growing numbers are reducing production and capital spending plans for 2009. In the short term, a shift is expected from larger expansions and grassroot construction, which have been prevalent in the steel and mining sectors in 2007 and 2008, to smaller capital projects. Upgrades, consolidations and maintenance projects will take precedence in 2009 as companies rein in spending. This could turn around during the second half of 2009 if economic conditions improve.

After the financial collapse, the industry paused, wondering what the fallout would be. Now, daily, we can see what the fallout is, as company after company announces production cutbacks, layoffs, plant closures and capital spending cuts in an attempt to conserve cash. Aluminum, steel and mining-project deferrals are starting to accumulate as the worldwide economic climate and sinking commodity prices impact the market.

In a move to conserve capital during uncertain economic times, the world's mining companies are increasingly moving to cutback spending especially for those mining commodities hard hit by the current down trend like aluminum, copper, nickel and molybdenum. Molybdenum, one of the hot commodities during 2007 and 2008 leading to a number of planned mining projects, has seen prices plummet more than 50% since the beginning of the year from $30 per pound to $12 per pound. Demand for molybdenum, which is used primarily as an alloy in steel manufacturing, has seemingly evaporated as the world's steel manufacturers have cut production because of low sales. This has resulted in a number of project cancellations and deferrals. A prime example of this happening in North America is Freeport-McMoRan, which recently deferred the development of at least $1 billion worth of mine expansions and restarts it is planning in Arizona and Colorado. This includes postponement of construction activities by the end of the year on the $500 million restart of the Climax Molybdenum mine, which is under construction in Colorado. For details see related November 12, 2008 news article - Freeport-McMoRan Defers $1 Billion Worth of Mining Projects in Arizona and Colorado.

Along with Freeport-McMoRan (NYSE:FCX) (Phoenix, Arizona), other companies announcing production cutbacks and project deferrals include Alcoa (NYSE:AA) (New York, New York), AK Steel (NYSE:AKS) (West Chester, Ohio) and RTI International Metals Incorporated (NYSE:RTI) (Niles, Ohio). RTI, for example, has delayed more than $400 million of titanium sponge and rolling mills projects in the U.S., because of market conditions.

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