The slowdown in the Chinese economy has led to a sharp pullback in base metal prices. Iron ore, which traded at $190 per ton in 2013, is now trading at just above $50 per ton. Then there is copper, which is also significantly below the levels it traded a few years ago.
The rally in base metals and other commodities was of course driven by China’s appetite for raw materials. As the world’s second-largest economy registered double-digit growth, demand for raw materials remained robust.
But that has changed since 2013 as China has shifted its focus from investment- and export-led growth to consumption-led growth. The shift has meant that China is now not spending as much on infrastructure as it was in the previous decade. This has led to a slowdown in demand for raw materials.
The slowdown in China has coincided with an increase in production from major mining companies. As a result, prices have slumped. Lower prices have forced miners to cut back on spending significantly.
The spending cuts have also had a negative impact on ancillary industries. The good news for miners though is that China might introduce fiscal stimulus measures in order to support its economy. The measures include increasing spending on infrastructure, which is a positive for mining companies and the support industry.
This morning, Nordex Explosives Limited (TSX-Venture:NXX), a Canada-based company announced that it has signed a supply agreement with a mining company. NXX is a manufacturer and distributor of explosives for the mining, quarry and construction industries for more than four decades.
NXX announced an agreement with Technica Mining, a division of Technica Group Inc. As per the agreement, NXX will supply explosive products and blasting expertise for a new mining operation in Ontario. Technica is also based in Canada and has completed work in the Sudbury
Basin and other locations, which include Nevada and Timmins.
NXX’s products will be initially used for the Sugar Zone property, which is located 60 km east of the Hemlo Gold Camp.
Jim Taylor, President and CEO of Nordex, said that the company is pleased to have reached an agreement with Technica Mining and looks forward to providing its explosive products and expertise. Taylor further said that the account is an important step in growing NXX’s business
through new relationships and provide increased exposure of its products to new user groups.
Shares of NXX have been in a down trend for most of 2015, however look to be coming off of a bottom over the last couple of months as shareholders start to see value in this beaten-up stock.
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