Forecasting metals consumption, prices (1)

I hold that man in awe who is clearly in contact with the future.

So advise Samuel Johnson and Ibsen. Today let us look at one man’s success in this field.

First, how do our metals prophets actually do? In my 1985 book Silver (an Ontario Ministry of Natural Resources publication), I presented about 115 of the then-recent forecasts on gold and silver prices by respectable authorities and not one of them proved correct.

One may well ask, “Does anyone get metal forecasts right?” The answer is “yes.” Canada is fortunate in having a small number of world-rank successful metals forecasters such as Peter Cavelti, Gerry Anders and newly arrived Jeffery Nichols.

When I was working in the United Nations a few years back on the Law of the Sea inter-governmental negotiations on deep-sea mining, I was struck by the optimistic forecasts of world nickel consumption put out by Inco and Falconbridge.

At one UN meeting of nickel- producing countries, I had to explain, much to their dismay, straight- line extrapolations rarely work out. The Cubans and Dominican Republicans were particularly unhappy.

The 1977 MNR book Nickel included a wide review of the available published forecasts of total world nickel consumption by 1990, based on 1976 data. The Inco chairman openly stated in October, 1977, that all of his company’s forecasts had gone wrong. The most fashionable forecast then was 6% per year compound growth.

The forecasts by Amax, the Economist Intelligence Unit, the Corrick study of the U.S. Bureau of Mines, the U.S. State Department and the Japanese were reviewed. Only Anders’ prediction in that book has stood the test of time. (Anders expanded on the subject in The Future of Nickel in 1980.)

The Japanese were the only ones remotely close to Anders’ reasoned analysis and prophetic graphs of 1977. Over the years, his “most likely” range continues to be exactly on track. His “most likely” figure for total world nickel consumption in the year 2000 (then 23 years away) was 1.1-1.2 million tons of nickel per year.

He dramatized the situation of the other (rosy) predictions by pointing out that the most optimistic of the forecasts would mean that by the late 28th century, total world nickel consumption would begin to exceed the total weight of planet earth, a delightful reductio ad absurdum.

Who is Gerry Anders? Well, he started out as a graduate in mining engineering from West Germany’s eminent Clausthal University, which has taught mining since 1755. Anders, who also has a Ph.D. in economics from Texas A&M, moved to Canada in 1955.

Anders joined the MNR in 1973 as supervisor metallic minerals and is now chief research analyst. On several occasions he has, with permission, lectured in mining companies and in other provincial governments, and also in various U.S. government agencies.

His work is highly technical. Many metals people do not realize that if you want to remonstrate with a government over its metals and mineral policies, you should deal with the policy-producing elements.

In Ontario, for example, the key policy aides are John Gammon, director mine ral development and lands; Denis Tiemann, assistant deputy minister; Brock Smith, deputy minister; and Hugh O’Neil, mines minister.

Of course, certain mining companies have given careful consideration to, and have acted on, the Anders analyses and forecasts. He has done many other things at the department, but his predictions are what grip metals people the most.

Anders is primarily a teacher, author and adviser, and he who teaches learns twice.

Next, we will question him on why government needs to know these things about the future and look at his price forecasts on major metals and how they are holding up, together with his methodology.003 T. P. (Tom) Mohide, a former president of the Winnipeg Commodity Exchange, served as a director of mining resources with the Ontario Ministry of Natural Resources prior to his retirement in 1986. The second part of this article will appear next month.

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