2015 was a big year for the MMTA in North America, with 6 of the 11 new Members hailing from the region. In addition to growing numbers, our programming also increased, with informal drinks leading into the Toronto conference and our China Seminar in New York last June. With a slight scheduling change, all of this led us to our annual MMTA New York Dinner this January, kindly sponsored by Exotech Inc., where we were joined by over 40 fellow Members and friends of the Association, despite the imminent snowstorm.
As the MMTA North American Committee Chair, I am often asked by those outside our field to describe just what “metals trade” means and what it is we do. Of course we’re trying to make a good living – a tough prospect at this time – so are Doctors, but it doesn’t mean that’s what medicine is about. The best answer I have is that as an industry, we try to get materials to where they can have the maximum benefit for global society, creating maximum positive socio-economic development for the people and places from whence these resources come, while also enabling those orchestrating commerce responsibly to provide well for their own families and communities.
This cooperation for mutual benefit not only brings materials and their applications together; it brings people and nations together. As a child of the Cold War and the son of a parent in the global metals trade, I saw this first-hand. My father, and those of his generation in our Association, have done this in China for five decades, and our industry has contributed to the greatest mass elevation of people out of poverty in history, not to mention the benefit to international relations across political divides.
Indeed this work continues today, around the world and in North America. I came to the NY Dinner from Mexico, where growing aerospace activity there is helping to increase development and socio-economic opportunity in a part of North America that is often overlooked.
And of course the technological power of our elements directly helps people walk with medical implants, fly around our planet and even beyond, and further transcend space and time (perhaps, at times, too much) with our smart phones.
From the outside, not everyone gets this about the metals trade, but this has been the understanding I gained from the generation that founded and grew this Association. It is the reason why we devote our time to the MMTA, to pay the world forward the opportunities we have been given. In this respect, the Association helps MMTA Members do this important work to the highest standards possible, and with maximum success, by setting an internationally recognized standard and providing you with information, support and community.
Sounds like a very special and enlightening industry, but a complicated one – if only there was a book which could help give those outside the industry more understanding and insight! Thankfully there is the newly released volume, The Elements of Power: Guns, Gadgets and the Struggle for a Sustainable Future in the Rare Metal Age, recently reviewed in the Crucible (November 2015). The MMTA was pleased to welcome its author, David Abraham, as this year’s speaker at our NY Dinner. Not only does David’s book make repeated and positive reference to the MMTA and its work, but in the same week as the NY Dinner, Elements of Power was the subject of a sterling review in The Economist, which mentions one character from the book, who happens the be the MMTA NA Committee Chair. http://www.economist.com/news/books-and-arts/21688372-they-are-obscure-yet-essential-why-rare-metals-make-world-go-round-unobtainiums?fsrc=scn/tw/te/pe/ed/unobtainiums
Indeed we are all greatly privileged to be in the metals trade, and with great privilege comes great responsibility. It is the privilege and responsibility of the MMTA to help our Members succeed in this industry, and through that, do our part to help elevate North America, the world and beyond! We look forward to achieving new heights together in 2016.
Noah M. Lehrman, NA Committee Chair, Hudson Metal & Alloy, New York
MMTA New York Dinner Presentation
In his presentation at the NY Dinner, David Abraham outlined how rare metals are the key to China’s next industries. The ‘Made in China 2025’ strategy focuses on ten industries, among them green technologies and aerospace. Rare metals, he explains, are at heart of these industries and China wants to maximize their domestic use. However, in order to achieve this, China needs first to rationalize the sector, then to consolidate and control production.
The end-state is not a completely consolidated sector—and can be in name only—consolidation may in reality mean by means of umbrella companies. But even if consolidation is not completely successful, it introduces more pricing power. The aim is to discourage outside investment that is not economic. The hope is to reduce black market trade. But at the same time there are always challenges; for example, local governments, especially cash strapped ones, are unlikely to fall in line.
To take a look at the wider perspective, the Chinese government is loath to allow wholesale bankruptcies and M&As with large layoffs. So it needs to work out inefficiencies and avoid such scenarios; It wants to control the materials of the future globally. It doesn’t want to rely on others, and in that sense, China wants to be a reliable supplier, and optimize its own industry, whilst limiting access to suppliers from other countries.
There are administrative measures, some more direct, such as stockpiling, others as non-direct as local government bond swaps. Beijing will help smooth the transition and keep companies going through local bond swaps. By this means, they are taking on bad debt and issuing government credit in return – RMB 3.3 trillion of loans in 2015 increasing to RMB 5 trillion this year – a back door way of recapitalizing the nation’s banks, and a means of keeping companies functioning.
Xi’s supply side reforms “improving the effectiveness of supply”, mean efficiency gains, rather than the elimination of ineffective supply (overcapacity), while there is an increasing sense the regime will be more tolerant. The hope is, over time, to shut down overcapacity and switch to new industries, but the pain of transition will be spread out and absorbed gradually, through mergers and acquisitions, rather than bankruptcies.
We should never forget that mining and metals are national security issues. That translates into strong bureaucratic powers, and the Chinese state will continue to play an important role.
But the backdrop in China is critical to understand. So let’s step back.
What is happening in China?
So what will we see in China overall, from a non-economist’s perspective? The economy is facing serious headwinds. And the risk is that political legitimacy is tied to stability, especially economic stability. So despite bold proclamations in the press of what China will do, gradualism will be the key to any change.
In terms of GDP, the growth target is binding. Reformers can shift policies, move reforms, but numbers are hard to back away from; therefore Beijing will find a way to plug demand gaps to meet its growth targets. For this reason, GDP is not a good measure—an extra railroad or a few airports can create growth, but growth alone is not the right focus. To understand the situation, we need to look below the headline numbers.
In conclusion, there is some mild strength in services and consumption. In fact, we have seen greater growth there than in industry in 2015 numbers so far. Services are growing faster than industry, so there are positives in the first three quarters of 2015. David’s analysis is that we will see more ‘muddling along’, hoping that administrative measures over the next 18 months take effect. He anticipates that more capital controls could be employed to reduce the need for drastic measures. Reuters recently suggested a 10-15% devaluation, but he is not so sure. ”I don’t see it”, he says, “Xi wants to restore credibility, and after a bungled limited devaluation and stock market policies, he wants to show a controlled hand”.
Growth is still at 6.9%, which by any other standard is huge, arguably equal to roughly 13-14% growth in 2009, but in reality, that number means little.
