Marian Radetzki

The Demand for Scrap and Primary Metal Ores After a Decline in Secular Growth

Old scrap and primary metal ores are substitute raw materials in metal production. The paper explores the changing composition in their use following a permanent deceleration in economic growth. The cases of copper and iron/steel are employed to track the usage of scrap after a secular slow-down in the rate of growth of finished metal demand, such as occurred in the mid-1970s. The conclusions suggest that the expanding role of scrap will result in stagnant demand for primary metal ores in the 1980s and 1990s. La demande deferraille et de minerai de metaux primnaires apres une chute dans la croissance economique seculaire. La ferraille et le minerai de m6taux primaires sont des matieres premieres qui sont des substituts dans la production du m6tal. Ce m6moire examine le changement dans la composition de lusage de lun et de lautre apres une decel6ration permanente dans la croissance 6conomique. On examine en d6tail les cas du cuivre et du fer/acier pour calibrer lusage de la ferraille apres la sorte de d6clin dans la croissance de la demande de m6tal fini quon a v6cu dans le milieu des annees 1970. Lauteur conclut que le role plus grand de la ferraille va vouloir dire une stagnation de la demande de minerais de metaux primaires dans les annees 1980 et 1990. Carl Van Duyne 1946-1983 My professional colleague and personal friend Carl Van Duyne died at the end of February 1983, as work on the present paper was drawing to a close. Though physically he is not longer with us, his spiritual presence will remain through his valuable contributions in various fields to the academic work of the Institute.

Regional development benefits of mineral projects

Abstract This paper discusses the development impact of mining and mineral processing on the regions in which they are located. The discussion is organized so as to be of relevance for policy formulation in resource-rich developing countries which consider the exploitation of their mineral wealth. The hypothesis is that mining technology, interpreted in a broad sense, has undergone a profound change since 1900. In consequence, experiences of mineralbased regional development in the industrialized countries around the turn of the century are of little relevance to the Third World in the 1980s. Contemporary mineral ventures have very weak regional development repercussions in the absence of forceful policies specifically directed towards the regional development goal.

The response of mining investment to a decline in economic growth : The case of copper in the 1970s

Abstract This paper analyses how an industry like mining, where investments take long to complete, adjusts to a permanent decline in demand growth. Optimal control theory is the method used. It is shown that an extended period of excess capacity and low prices will follow after a slowdown in growth. This is because profit maximizing firms will continue to complete projects to which large investment funds have already been committed, even when they anticipate the price fall. Numerical solutions of the control problem, obtained by using parameters relevant to the copper industry, are compared with actual performance of this industry in the late 1970s.

Has political risk scared mineral investment away from the deposits in developing countries

In reply to recent assertions of a sharp diversion of metal mineral exploration and mining investment from developing to industrialized countries, the author argues that these worries are misdire ...

Metal mineral resource exhaustion and the threat to material progress: The case of copper

Abstract Copper reserves have increased at a rate remarkably similar to the expansion of copper mining production. Large parts of the world have not yet been prospected for minerals in detail. Great new copper deposits are likely to be discovered in the developing world as exploration is intensified. Over the past 150 years, the metal content in economic copper ores has decreased by more than 90 per cent. Yet, cost-reducing technological progress has prevented costs from rising. Scrap constitutes a large and growing source of copper. Even in the absence of further technological progress, this would restrict the potential rise in copper prices. Much of the analysis related to copper applies to other metals too. Physical scarcities or excessive prices of metals are very unlikely to hamper economic progress in the foreseeable future.

Effects of a dollar appreciation on dollar prices in international commodity markets

Abstract The dollar-based commodity price index prepared by UNCTAD declined by 30% in the five-year period ending in January 1985. A variety of factors explains this fall. Most important among these is probably the phenomenal appreciation of the US currency. For instance, the dollar rose against the Deutschmark by 84% during that time, and UNCTADs commodity price index shows a rise of about 30% when measured in West German money. Surely, the dollar commodity prices would have fallen far less or possibly even increased in the absence of the exchange rate shifts that were actually recorded.

Market structure and bargaining power: A study of three international mineral markets

Abstract This paper considers how differences in the structure and arrangements between the international markets for bauxite, iron ore and copper affect the bargaining strength and division of benefits between buyers and sellers. After describing the characteristic features of each market, and noting the absence of appropriate economic theory to disentangle the issue at hand, an attempt is made to clarify the problem by considering the difference between the markets in terms of five factors - degree of concentration, ability of the parties to inflict losses on each other, varying shares of the raw material in final product prices, structure of the market in which the final products are sold, and the process of trade negotiation.

Mineral commodity stabilisation: The producers' view

Abstract The author compares the relative merits of production cuts and buffer stocks as measures for market stabilisation in mineral commodity markets. He concludes that, although under certain conditions producers may gain by building up buffer stocks at times of relatively low demand, the low global price elasticities in most minerals markets make it likely that producers interests would usually be better served by production cuts when demand falls.

Alternative fiscal regimes for mining in developing countries

Abstract The government revenue from foreign-owned mineral projects in developing countries can be extracted through a variety of alternative tools. This paper scrutinizes the implications for the government and for the private investor, respectively, of fiscal regimes relying mainly on royalties, income taxes and government equity participation. The conclusion of the analysis is that an income tax biased regime offers greater advantages to governments of mineral rich developing countries interested in an efficient and development-promoting expansion of the mineral sector with foreign investor involvement, than do regimes biased in favor of royalties and government equity take.

An Integrated Market Model of Exhaustible Resource Behaviour

The purpose of this paper is to design a theoretically sound and empirically realistic model capable of analysing long run exhaustible resource market behaviour with the inclusion of intermediate and short run phenomena. Such a model would attempt to reproduce and to predict resource quantity and price behaviour over time. Surprisingly, the history of such long run models which would explain resource quantity and price adjustments is almost completely missing from the literature. The standard commodity model (SCM) employed in most econometric representations of exhaustible resource markets focuses on the short run and is typically void of long run considerations, e.g., see Labys (1973). The rational extraction model (REM) derived from Hotelling’s (1931) seminal analysis does address the long run. However, it faces very serious empirical problems because of its many simplifying assumptions. While theoreticians have shown the advantages of relaxing some of these assumptions, no overall or integrated model structure has emerged which could serve as a basis for empirical model testing and application. Similarly, econometricians have not yet developed modelling methods which can overcome some of the serious problems encountered because of the structural changes in resource markets over time.