On behalf of Dr. Supachai, Secretary-General of UNCTAD, I am pleased to welcome you all to Geneva and to the Second Annual General Meeting of the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development.
This meeting is taking place at a momentous time for the world mining industry, which is in the midst of radical change on many fronts. Governments will need to follow and assess developments carefully or risk being overtaken by events.
Rapid economic growth has led to very strong Asian demand for industrial raw materials, including almost all metals. Trade flows have changed, and the focus of attention is now almost entirely on Asia, where China has become the world´s most important user of many metals. The growth of Asian demand has produced strains on capacity, which was formerly surplus. Miners and smelters have a hard time keeping up with the Asian expansion, and prices have risen dramatically. The most spectacular example is nickel, the price for which has now exceeded $30,000 per tonne - more than twice the previous high of 1988. Early this year, copper prices approached the $9,000-per-tonne mark, or three times more than the record 1995 level. Zinc prices have almost reached $4,000 per tonne - more than twice as much as the previous record of 1989. Record levels have also been reported for aluminium and lead. Even the normally peaceful market for iron ore, where prices are negotiated once a year and little influenced by speculative forces, saw a 71% increase last year and 19% this year.
High prices have, of course led to high - and in some cases very high - profits for mining and metals companies. For instance, the world´s largest nickel producer, Inco, had its highest-ever quarterly profit in the second quarter of 2006, over 20% above analysts´ predictions and 60% over the results of one year ago. Chile´s largest mining companies more than doubled their profits during the first half of 2006, to $11.8 billion. The two largest copper miners had the most impressive profits, with Codelco showing a net profit of $4.6 billion and Escondida earning $2.9 billion.
The high profits have also encouraged merger-and-takeover activity among mining companies; Canadian nickel companies in particular are being courted by eager suitors. While this would be expected to lead to a further concentration of the industry, the trend is offset by the increasing importance of companies whose role as international investors is relatively new. This is especially the case for Asian firms.
The high prices, higher profits and takeover activity are all leading to shifts in how business is done. Most importantly, the distribution of power between investors and host country governments appears to be shifting. High profits have led to a heated debate and to calls for revisions in how those profits are shared. Several governments are re-examining their legislation and considering what changes might be desirable or justified. They will, as always, have to balance the objective of maximizing government revenue from mining against the goal of attracting investment.
All of these new developments in the sector give the Intergovernmental Forum a chance to prove its value as a platform for policy dialogue and mutual understanding.
For its part, UNCTAD has a long history of analysis and policy initiatives in the area of mining and development. In recent years, we have focused on how the mineral sector can contribute to national economic development, and on the impact of mining on local and regional economies. My colleague will describe our activities in detail later, but I would like to mention that next month we are organizing an expert meeting on foreign direct investment in extractive industries. We are also planning to devote next year´s World Investment Report to this subject, and next spring we will hold organize a conference on mining taxation.
UNCTAD is eager to contribute to the discussions taking place in this Forum and to your intersessional activities. We like to think that our position as facilitator of North-South and South-South cooperation enhances the usefulness of our contributions to the debate. We hope this is particularly the case at a time when the mining industry - where discussion has traditionally been dominated by North-South issues - is seeing a significant increase in South-South cooperation.
I am certain that this Second Annual Meeting of the Intergovernmental Forum will be a success and wish you all the best in your important work.