MERN - Québec Mines








        ISSN en ligne :
        1499-383X





February 2002

 


Summary and Highlights of the Québec mining industry in 2001

Although most analysts had predicted a slowdown in the world economy in 2001, the slump was worse than expected. The drop in economic activity began in the United Sates and spread to almost all areas of the world. Signs of the slowdown were already perceptible before the September 11 terrorist attacks and grew stronger after the attacks, meaning that, in most parts of the world, the downward adjustments to the 2001 growth forecasts were greater than would otherwise have been expected. This was the first time in twenty years that all OECD countries had experienced such a synchronized economic slowdown. The world economy is estimated to have grown by 2.4% in 2001.

The decline in the US economy, which began in the third quarter of 2000, was even more marked in 2001. Industrial production continued to drop, as did business investments and exports. The US economy was particularly affected by a decreased demand for goods in the information and communications technology sector. The events of September 11 rattled the confidence of economic agents, especially consumers whose spending was at the time the main driving force behind the US economy. The United States, after its longest-ever expansion cycle, saw its real GDP shrink by 1.3% in the third quarter, and on November 26, the National Bureau of Economic Research (NBER) announced that the country was officially in recession. For 2001 as a whole, the growth in real GDP is estimated at 1.1%.

In the euro zone, growth had already begun to falter in late 2000, and was hit harder than expected. Domestic demand dropped, especially in terms of investment, and the flow of exports slowed. The growth in real GDP during the second and third quarters was only just above zero, and the terrorist attacks led to a further decline in the economic situation of the euro zone, although it should be able to avoid a recession.

Japan moved into recession for the third time in the last ten years. In fact, the Japanese economy is stalled since mid-2000, owing to the collapse of the information and communications technology sector and the drop in outside demand. Japan is also facing major structural problems, including an extremely high public debt and a banking sector that has to deal with a large number of loan defaults.

Economic activity in Canada went into decline in the fourth quarter of 2000, and the growth of the Canadian economy was strongly compromised by a drop in exports, especially to the United States. Household spending remained relatively high, while business investment, in particular in machinery and equipment, plummeted. After a reduction in the GDP in the third quarter, partly attributable to the terrorist attacks, Canada was considered by most analysts to have slipped into recession. For the year as a whole, Canada's real GDP probably grew by 1.3%. Clearly, Québec was also affected by the difficulties experienced by its two major trading partners, the United States and Canada. The Québec economy, hit hard by a drop in exports to the United States, especially in the field of information and communications technologies, was almost in recession in the first quarter, and the growth in Québec's GDP for 2001 was probably around 1.1%.

This major slowdown in the world economy obviously reduced demand for most minerals, leading to larger inventories and a drop in prices, which had already begun to move downwards in the last months of 2000. This was particularly true in the case of base metals, which recorded average prices in December 2001 that were 20% below the comparable prices at the end of the previous year. Gold prices ran counter to this trend, because of the September 11 events but still, they only rosed slightly

Outlook for 2002

The recovery of the world economy will depend largely on the economic performance of the United States. According to most forecasts, the recession in the United States will be short-lived. The easing of monetary policy in 2001, along with the implementation of important tax and spending measures in the federal budget, should result in a gradual recovery of the US economy during the first quarter of 2002 and a return to growth in the second half of the year provided, of course, that the geopolitical context and confidence levels do not worsen. Growth in world GDP is expected to average around 2.5%.

An easing of monetary policy and a strong recovery in the United States would allow the economy of the euro zone to gather speed by the end of 2002. In Japan, not only will the recession continue into the first two quarters, but no recovery is expected before the end of the year, and then only if the situation improves in the United States and the structural problems of the Japanese economy are resolved. The economy in Canada and Québec will obviously benefit from the expected recovery in the United States, and also from various internal factors, such as the set of macro-economic instruments brought into play by both the federal and provincial governments. The two economies should therefore return progressively to a growth situation during the first half of the year.

In 2002, the demand for mineral products will increase as the world economy recovers. Prices for base metals should begin to turn around, especially during the third and fourth quarters. However, the pace and strength of the recovery will also depend greatly on the ability to match production to demand.















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