This is part two of a two-part series. Click here to read the first part.

Yesterday, we talked about predictive markets and touched on their applicability to metal markets in general. Without surveying all of the literature, suffice it to say that predictive markets, can be much more accurate than traditional polling techniques or other analytical methods. So given the fact that there are dozens of research firms and analysts covering the metal and mining sector, why are there no predictive markets (at least, we couldn’t find one), with the exceptions noted from the comments in yesterday’s post (e.g. the futures markets for aluminum, copper and the balance of base metals).

To begin, there are several “must-haves” for a predictive market to work. And perhaps not surprisingly, many of these must-haves relate to the requirements of all markets in general. They all need liquidity or people to take positions. One of the primary reasons why the steel long products futures market has not come on stream, in our opinion is due to lack of liquidity on the producer side. See an earlier MetalMiner post on that subject here. (more…)

If you can’t buy them, build them, seems to be the philosophy driving the major steel mills investment in new mines. A recent report in The Wall Street Journal details the challenges steel companies are facing in turning themselves into miners. Arcelor Mittal has purchased the rights to develop the old Liberian-Swedish-American mining company Lamco’s facilities in Liberia, closed in 1989 during the first of many civil wars and coups to blight the country in the 90’s. Mittal see this as one component of a hub of West African mining operations strategically placed to feed both their European and North American steel mills. The challenges are significant, since railway lines, bridges and roads have been lost over the last 20 years of strife. Prospective miners will need to rebuild the infrastructure before they can move one ton of iron ore. Project costs have already escalated from $900m to $1.5bn, and the mine isn’t due to start production before next year. (more…)

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