HOUSTON While global economic uncertainty plagues the commodities markets, capital-intensive projects in the metals and mining sector are expected to increase in the near term, according to an executive at engineering and construction firm Foster Wheeler USA Corp.
"Were seeing wild price swings up and down in the metals sector. However, this strong pricing in raw materialssuch as ferrous scrap, rebar, beams, copperhas led to a strong metals and mining capital project market sector for (engineering, procurement and construction firms)," John K. Crockett, director of procurement and subcontracts at the Houston-based company, told attendees at the Journal of Commerces Breakbulk Americas Conference.
Crockett said that after the economic collapse in 2008, rising copper prices led to the growth of new mining projects, which he expects to see again in the near term. However, these spikes may not be caused by a real change in demand. "Although it is hard to decipher, many of these price swings are caused by buyers in countries adding to and depleting from inventories, which has caused temporary spikes and reduction in pricing vs. a real change in demand. The bottom line, though, is that the pricing trend over time will be upward in these commodities."
But before any major capital-intensive projects begin, the slide in consumer confidence must be reversed.
"There are a lot of headlines that have not changed over the past year," Crockett said. "The European debt crisis continues, along with instability in the Mideast. These two factors continue to add to the loss of confidence in the West(ern) economies and reluctance to make investment decisions," resulting in many construction projects being delayed or postponed.
He forecast that capacity utilization will continue to decline in 2013. "Looking at the three largest emerging marketsChina, Brazil and Indiayou see blips (and) up and downs (over) the past 12 to 18 months. Theres no clear upward movement to indicate expansion in those economies," he said. "Looking at the U.S., Japan and the eurozone, you can see that Japan and the eurozone continue to struggle. ... There is also no clear direction in the U.S. economy. This indicates that the market continues to be a buyers market."