EDITORIAL PAGE Metal industry prospects in the 1990s

Just when you thought you had seen it all — the dismantling of the Berlin Wall, free elections in the East Bloc nations and an attempt at political reform in the Soviet Union — along comes power-hungry Iraq to present yet another potentially explosive situation in the Middle East. The Persian Gulf country’s mid-summer invasion of tiny Kuwait sent stagnant oil and gas prices spiralling upwards and equity markets reeling the other way. The show of force was a marvelous example of how an external factor can affect the world’s financial markets, in the short-term at least. It is a portentous beginning to a new decade not yet one year old.

What do the 1990s hold for our global metal markets, where economic performance, trade wars and a host of other factors have a profound influence?

The up-and-down fortunes of metal consumption during the past two decades, as securities firm Midland Walwyn points out in a recent research report, were directly tied to the two oil crises and the huge money supply growth. While government deficits and high real interest rates are still obstacles to overcome, structural change must be in the works. According to the research report, 50% of the world’s resources are consumed by 15% of the population, only one-quarter of the planet’s inhabitants have access to electricity, and the number of people on Spaceship Earth continues to increase.

Eastern Europe has nowhere to go but forward as it catches up to the living standards enjoyed by the West. Third World countries, too, stand to benefit as technology helps to spread out the world’s resources more evenly. Making electricity more available on a global basis should translate into greater sales of copper and aluminum.

In Western Europe, unification changes are under way which will see the European Community soon become the world’s largest, single market. Huge multi-national corporations currently operating in Europe can only grow larger as their business might expands.

According to the report, copper consumption by South Korea is approaching that of the United Kingdom and has already surpassed that of Canada. The growing trend in Asia in general is one of metal consumption for domestic use.

In North America, total metal consumption has not changed significantly during the past two decades. It is argued reduced military spending, accompanying decreasing government deficits in the U.S. and a drop in real interest rate levels, could spur greater activity by individuals and corporations and free up more funds for repairs to that country’s aging road networks, bridges and other such infrastructure.

The push for a cleaner environment could also be a blessing in disguise for metals. Legislated scrubbers for high sulphur-burning power stations, to use one example, will involve the application of stainless steel (nickel is an ingredient in stainless steel) in their manufacture.

Numerous other examples in the research report lend support to the argument that prospects for the metal industry in the 1990s are anything but dim.