The Ryder Cup jogs my memory of the interview course of for metals analysts after I was at S&P World Market Intelligence (SPGMI). Candidates had been ceaselessly requested; what number of golf balls are bought annually? Famously, an identical query was requested by McKinsey & Co.; specifically, what number of golf balls would match right into a Boeing 747?
The purpose, after all, isn’t that SPGMI (or McKinsey) was searching for analysts who knew the reply. Relatively we’re searching for individuals with a capability to assume issues although, and attain acceptable conclusions.
For the report, I keep in mind that one (profitable) interviewee was ready to take a look at the massive image as a result of he recalled there have been some 35,000 golf programs on the earth (which, by the way, means there’s nearly one golf course per mining challenge, at the very least as was recorded on the SPGMI mining database). Based mostly on utilisation charges, sunny days etcetera, the interviewee reckoned that these programs would every host an annual common of 15,000 rounds. If we exclude loopy golf, he estimated that a median spherical would see two balls misplaced, broken or blamed for poor efficiency. Say 1.1 billion balls misplaced or discarded yearly, with maybe ten occasions that quantity in circulation.
A second SPGMI interviewee began his calculation with particular person golfers, and assumed that one in 150 of the world’s inhabitants had been prone to play at the very least one spherical of golf per yr — which is about proper globally, though the proportion of golfers rises to 1 in each 75 Europeans and an astonishing one in each 13 Individuals (25 million registered golfers in a U.S. inhabitants of 330 million).
This potential metals analyst steered that the world’s 50 million golfers would possibly play a median of ten rounds of 100 strokes per yr, that’s, 50 billion strokes. Assuming an identical whole is spent on observe, that might mean100 billion annual swipes at a ball.
Half of this effort, he reckoned, is spent on pictures which can be hardly prone to end in a misplaced ball, for instance on the driving vary or placing. If, of the rest, one in 100 strokes leads to a misplaced ball, then some 500 million balls must be changed annually. This interviewee didn’t get the job as he had didn’t have in mind these balls purchased as presents or changed by disgruntled golfers (which is prone to at the very least equal the misplaced balls).
No matter their analytical abilities, the predicting of iron ore costs isn’t for the faint hearted in the mean time. Covid-19 has made all financial forecasting problematic, and there’s added political uncertainty in China, the place ten months in the past President Xi Jinping launched a left-leaning ‘Widespread Prosperity’ agenda.
We’re but to see the long-term impression of the crackdown on privately-owned corporations and entrepreneurs however Beijing’s curbs on metal output to gradual the construction-intensive economic system have led to dramatic worth falls for iron ore.
Property begins in China are down 9% this yr, and Financial institution of America estimates that development exercise within the nation accounts for 29% of world metal and 11% of copper demand, respectively. Consequently, the value of iron ore (62% Fe CFR China) has halved over the previous two months to underneath $100 per tonne. Iron ore and copper markets are gripped, particularly, by the debt disaster at Evergrande Group, which is China’s second-largest property developer.
Goldman Sachs predicts that this yr’s shortfall of 60 million tonnes in seaborne iron ore will develop into a 3 million tonne surplus subsequent yr, and maybe an oversupply of 69 million tonnes by 2024 (when a median worth of solely $75 per tonne is predicted). UBS is much more pessimistic, and reckons the marketplace for iron ore is already in surplus.
Reflecting this turmoil, the MSCI (previously Morgan Stanley Capital Worldwide) World Metals and Mining index has been in retreat since Could, and the fairness index has now shed all of its prior beneficial properties for the yr.
If solely iron ore markets had been as straightforward to foretell because the Ryder Cup. Solely two of the 11 competitions since 1999 haven’t been received by the house group — the exceptions being European successes in 2004 at Oakland Hills, Michigan, and the 2012 ‘Miracle of Medinah’ in Illinois.
To place you out of your McKinsey distress; our greatest guess at SPGMI was 21 million balls to fill the empty shell of a Boeing 747. That equates to the variety of golf balls changed globally each week; disgrace they aren’t made from iron.
— Dr. Chris Hinde is a mining engineer and the director of Decide and Pen Ltd., a U.Okay.-based consulting agency he arrange in 2018 specializing in mining trade developments. He beforehand labored for S&P World Market Intelligence’s Metals and Mining division.
(This text first appeared in The Northern Miner)