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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • Mining Industry Starts Booming: Mining Capacity Utilization Keeps Increasing 6 comments
    Nov 16, 2012 12:37 PM | about stocks: XME

    Capacity utilization was basically flat at 77.8% for the month of October 2012. Due to the storm "Sandy", we had a lower capacity utilization.

    There is one positive area though and that's the mining sector. Capacity utilization on mining increased to an all time high of 90.4%. This is 3.1% above its historical average.

    It's obvious that this means that there is an expansion in business investment in the mining industry. As most mining companies in the U.S. are almost at full capacity 90.4%, it means that only 9.6% of all mining companies are idle. This implicitly means that there is incentive to invest in the mining industry as we are quickly approaching full capacity.

    Maybe that's why George Soros is buying more of the mining company index (NYSEARCA:XME) as I pointed out yesterday here.



    (click to enlarge)
    Chart 1: Capacity utilization
    Stocks: XME
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Comments (6)
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  • dieuwer
    , contributor
    Comments (2984) | Send Message
    Capacity utilization...for what?
    16 Nov 2012, 01:23 PM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » for... the total industry?
    16 Nov 2012, 01:50 PM Reply Like
  • dieuwer
    , contributor
    Comments (2984) | Send Message
    You say that capacity utilization for the mining industry is running close to 100%.
    But who is buying all these mining products if the world is supposedly going into a perma-slump? Why buy steel if you don't need it? Why buy copper if you don't need it?
    Said otherwise: where is the GROWTH that the UTILIZATION implies?
    16 Nov 2012, 02:22 PM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » Hey, don't forget oil and gas is also included in the mining numbers, probably shale gas boom in the United States especially in North Dakota.


    By the way, mining capacity utilisation never got so close to 100%. So the U.S. is producing pretty well.


    Why say nobody needs it, you produce more natural gas, prices drop, everyone is happy and buys more of it.
    16 Nov 2012, 03:02 PM Reply Like
  • dieuwer
    , contributor
    Comments (2984) | Send Message
    Didn't know natural gas was included in "mining"...
    16 Nov 2012, 03:10 PM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » http://yhoo.it/ULpcKs


    "Oil and gas output is included in the mining figure, and much of the strength is due to the shale output of oil (North Dakota) and gas (many states, but especially in the Marcellus Shale of Pennsylvania and West Virginia)."
    17 Nov 2012, 08:28 AM Reply Like
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