As canaries in coal mines go, mining shares tend to be reliable harbingers of a sell-off in industrial commodities in a downturn. But although London-listed mining stocks sold off heavily in July and August, falling by almost 25 per cent, commodity prices have not uniformly followed them lower. The Dow Jones-UBS industrial metals index is at a 12-month low, and copper is at its lowest in 10 months on fears of a eurozone and US slowdown. But iron ore and coal prices remain firm. It is not yet time to call the end of the cycle.
Demand in developed economies will almost certainly be subdued in the near term. Caution abounds; industrial groups have not restocked post-summer. But China shows few signs of a material slackening in demand. Economic growth has slowed, mainly because of measures to curb credit. But that slowdown – from more than 10 per cent in the fourth quarter of last year to about
9 per cent in the first half of this – is itself already slowing, Credit Suisse notes. After all, urbanisation continues apace. Steelmakers have had to boost production to cope with the state housing programme. That spells continued demand for iron ore and coking coal for Anglo American, BHP Billiton, Rio Tinto and Vale.