An article in yesterday’s Financial Times reports ‘Rio Tinto warns of slowdown in demand’ – reading time 4 minutes.  Rio Tinto is the world’s second largest iron ore miner and a large producer of copper and other resource commodities.

The article quotes Rio Tinto’s Chief Executive as saying “In a few cases, customers are asking to reschedule deliveries.  This is consistent with customers being cautious about the current state of business’, in circumstances where “In the last two months most economists have been de-rating global economic forecasts.  You cannot ignore that”.

The article also reports that:

• Cargill, one of the world’s largest food commodity traders said last week that global growth was “weakening and weakening” and sees this as a ‘clear sign’ the current ‘financial turmoil’ is beginning to ‘hit the commodities sector’;

• Chilean state-owned Codelco, the world’s largest copper producer, also has said that some customers have asked for shipment delays, while at the same time other customers has increased their orders; and,

• Rio Tinto’s Chief Executive also said that while customers are somewhat more cautious, the slowdown he spoke of was not spreading to China, where he said Rio Tinto’s “largest customers are not showing any sign of slowdown”.

While I think this article, like many articles from many media sources, may have slightly ‘overstated its title’, the message it carries for me is loud and clear.

If you participate in the Resource Equities Markets, read as much as you can about what those who hold senior positions in large resource companies say. Listen to what they say about the current state of their respective sub-industries (i.e. gold, silver, copper, nickel, zinc, etc.) as important barometers on the prospective overall world and country specific economies, on general financial markets, and on resource specific equity markets.

I have always believed the objective opinion of a seasoned operating executive almost always trumps the objective opinion of a theoretical ‘expert’ without operating experience.  The trick is to separate out objective opinions from those in each of those quite different groups from ‘vested interest and biased’ opinions.

Over the next few months look for more of this type of ‘senior operating officer commentary’ in these e-mails.  I will work to comment on any such commentary that strikes me as objective, as I think that type of commentary to be particularly useful.

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