ish phenomenon. He displayed SO-

called ‘boomerang’ curves for Sweden. These plots of electrical ener- gy consumption versus fuel oil con- sumption depicted a steady rise in both oil and electricity consumption during 1955-70 and then a remarkable turnround for oil in ensuing years, and, according to Gerholm, the graphs typified what has happened in many other countries. The trend illus- trated by the boomerang curves re- sults from various and sometimes con- flicting factors, which the professor touched upon. He cited figures from the Third World as well as from European countries to support his inferences. He acknowledged that generalization is difficult but felt driven to a clear conclusion: an all- electric future is in store for all coun-

tries, developing as well as industrial- ized.

‘Electricity must play a key role in the inevitable transition from hydro- carbons to alternative forms of prim- ary energy’, judged Gerholm. He ended with a warning and a reassur- ance. ‘Unless we manage to complete this transition in an orderly way, we are almost bound to face disaster. Rapidly growing energy needs, parti- cularly in the Third World, and the necessity to substitute for oil, which still accounts for more than half the world’s energy consumption, cannot be met by any other means. It it is therefore reassuring to find that this historic transition is currently well under way.’

The book of the symposium, in which the proceedings of five sessions

Conference reports

(dealing respectively with policy, safe- ty and public acceptance, enrichment, technical developments and the ura- nium industry) will be fully recorded, is to be published early this year. Inquiries should be addressed to the Uranium Institute, Twelfth Floor, Bowater House, 68 Knightsbridge, London SWlX 7LT.

Arthur Conway Harrow, UK

‘Crowson’s paper, perhaps rather arbit- rarily, has been given the spotlight in this necessarily brief report of two very full days. The symposium did not lack argu- ments on the other side of the investment- and exploration-timing debate, for example in a thoughtful analysis by Michel A. Berville of Cogema, France. But it was Crowson in particular who debunked the build-up of uranium as an altogether ex- ceptional resource.

A case of heightened awareness

CESCO International Seminar on Challenges of Copper to the Year 2000, Santiago, Chile, 28-29 November 1985

That the copper industry is going

through one of its deepest crises in history is a well known fact, but that producers and consumers are doing little to revert it is, to say the least, amazing. This is one of the reasons that prompted Chile’s Independent Studies Center - the Centro de Estu- dios del Cobre y la Mineria (CESCO) to organize a two-day seminar in Santiago to analyse the challenges of copper to the year 2000 and discuss possible alternatives for action. The first two sessions on consumption and production strategies of producers in copper provided a view of the most important issues; while the third and last session centred on the policy alternatives available to Chile to hand- le the crisis.

The paper by Robert Perlman, Chairman of the Commodities Re- search Unit of London (presented in his absence by CRU’s Research Direc- tor Christopher Stobart) was a diagno- sis of present copper consumption, complemented with an outlook to the year 2000. Stobart noted that although

RESOURCES POLICY March 1986

non-socialist world consumption of refined copper in 1984 reached an

all-time high of 7.6 Mt, perhaps as much as 65-75% of the upturn was accounted for by increased US de- mand, which served to mask a gener- ally sluggish performance elsewhere. He said demand from OECD coun- tries grew at an average of 230 000 tonnes per year in the early 1960s but tonnage increases fell with each suc- ceeding cycle, attaining a disconcert- ing dip of 165000 Mt in absolute levels between 1979 and 1984. Stobart attri- buted this drop to a deceleration in the rate of economic growth of OECD countries and to a lower intensity in the use of copper. This implies that even if OECD countries can increase their growth rates in the future, it is probable that copper consumption will continue to stagnate. The changing trends influencing end-use demand are central in understanding low cop- per consumption from a microecono- mic perspective. Stobart cited miniaturization, substitution and func- tional replacement as key elements in

this process. He continued his analysis by pointing out that the steady rise of consumption growth in the non- OECD countries (where 800000 Mt of additional rod capacity have been installed since 1980) has represented a net addition to global demand for copper, but some of it reflected a mere geographical shift, adding that by it- self the process will not generate any genuine additions to demand, but will result in a further increase in the relative importance of the non-OECD countries.

Debt logjam

However, although several countries in the Middle East and South-East Asia should show high GDP growth rates in the future increasing refined demand, others, such as Brazil, have halted consumption as a result of the debt logjam.

Stobart said that one solution to the crisis would be reorganizing promo- tion in the copper industry, which includes establishing closer links be- tween fabricators and producers, in- creasing financing for particular prom- otional projects, and paying greater attention to potential markets in de- veloping countries.

Marian Radetzki of the Stockholm Institute of International Economic Studies, presented a paper on structu-

77

Conference reports

t-al changes in world copper supply, blaming overshooting in production capacity for persistent low prices. He attributed this phenomenon to the non-socialist world’s projected con- sumption trends in the 1960-70 period that established consumption levels of

over 8.0 Mt at the beginning of the 1980s to attain 10.0 Mt by 1985.

Radetzki said that when it was evident that these projections did not match reality, the industry found itself with a number of projects in the pipeline on which so much money had been spent that completion was pre- ferable even when an extended period of low prices was taken into account.

He warned of the increasing import- ance of old scrap supply and presented a scenario where copper demand de- clines to 2% per annum until the year 2000 coupled with a yearly scrap supp- ly growth rate of 4.5%. In this scen- ario scrap accounts for 25% of total demand in 1975 and could reach as much as 45% of the market by the year 2000 with the consequent stagna- tion of copper concentrates consump- tion.

Evident

Radetzki also said that the rise of the US dollar has provided a partial shield to non-American copper companies against depressed demand, but as the dollar begins to fall, US producers are regaining competitivenes and produc- ers elsewhere will be forced to take a greater share of production cuts. However, he suggested that this will have a greater impact on private cor- porations than on companies operat- ing in countries such as Chile and Zambia that depend heavily on copper production and can protect themselves by adjusting their currencies to cut down production costs in dollar terms. Radetzki concluded by saying that his not-very-encouraging messages stem from the decline of economic growth in the developed world, adding that once equilibrium between supply and demand is re-established, prices will be substantially higher than today. Phillip Crowson, Chief Economist of Rio Tinto Zinc, presented a less pessi- mistic outlook, by saying that a belief that the market’s fundamentals will

78

improve over the longer term had guided his own company’s recent in- vestments in undeveloped copper properties. The challenge, he said, was to become and remain relatively low cost. Crowson rejected attempts to bypass the laws of supply and demand by using mechanisms such as the protection of a high-cost industry, tariff increases or devaluations of the exchange rate to remain competitive. He gave an ardent defence of free- market policies using as an example the collapse of the International Tin Agreement and the EEC’s Common Agricultural Policy which encourage overproduction at prices above world level. He endorsed, however, some restraint on production, even by effi- cient low-cost producers, to foster market balance.

Crowson made several propositions to improve the industry’s standing. He said it was necessary to support mar- ket transparency and free exchange of information among those involved in the copper industry; to initiate aggres- sive marketing to encourage new or expanded markets; and to form an international copper study group built on existing institutions, which will help its members to avoid climbing the learning curve afresh. He questioned the damages caused to the copper industry by substitution, arguing that weak prices will help offset its effects and announced that an effective image campaign for copper will be mounted on the main European markets in the future.

Carlos Fortin, former head of the Chilean Copper Corporation (CODELCO-Chile) in Europe and current Deputy Director of the Insti- tute of Development Studies at the University of Sussex began the second session. His paper was presented from the standpoint of the Third World. He said it is usually assumed that mining output depends on price levels, hence, the higher the price, the higher the output and vice versa. However, due to the need to increase export earning, Third World producers have a per- verse supply response to falling prices and increase their output accordingly.

Fortin said this is a logical step, because there are no other alterna- tives available, considering that plum-

meting copper prices and excess capacity are a result of the world economic situation and not the fault of state-owned copper companies. To gain new markets, he suggested bi- lateral agreements between Third World producers and Third World consumers, particularly with the newly industrializing countries of South-East Asia. He called for greater coopera- tion between Third World countries to increase efficiency and seek non- conventional uses of copper.

Strategies and policies

Ruben Schindler, Executive Vice- President of the Chilean Copper Com- mission, focused his presentation on the strategies and policies of copper producers, in the context of the inter- national economic system’s trans- formations and of the copper indus- try’s structural changes. Defending Chile’s copper capacity expansions on the grounds that they contribute to cut down costs, he said CODELCO op- erations are profitable even at current prices, because of natural advantages (good ore grades, easy access to ports) and a serious rationalization process that has increased efficiency.

Schindler said Chilean copper - including the state-owned and the private sector - represents a third of world reserves. However, Chile only accounts for 15% of world production. The aim is to increase the participa- tion of Chile as a world producer, capturing marginal demand increases, while avoiding major marketing dis- tortions. This places the country in a leadership position to assure the de- velopment of the industry in the long term and contribute to the recovery of the prestige that copper had in the past. The success of this process de- pends on the capacity to reorganize and expand markets, while assuring consumers a stable long-term supply at reasonable prices. He rejected any possibility for production cutbacks, the establishment of a producer’s price higher than free-market prices, or concertation among countries belong- ing to the Intergovernmental Council of Copper Exporting Countries (CIPEC) to form a cartel. However, he supported short-term interventions

RESOURCES POLICY March 1986

in the metal exchanges to offset price drops generated by expectations not directly related to the market fun- damentals.

The last session was opened by CESCO’s representative, Juan Eduardo Herrera who supported Schindler’s position of Chile’s need to become a leader in the industry, prop- osing several alternatives to make this leadership possible. He said producers and consumers should begin informal talks with the idea of forming a study group such as the existing lead and zinc grouping. The task is also to stabilize prices at reasonable and re- munerative levels in the long term, adding that US $0.75 per pound re- sponds to those characteristics. Lead- ership also requires a major participa- tion of the industry in LME and COMEX, not to replace them, but to act as a voting member within the existing organizations. Herrera sided with Stobart and Crowson, calling for a marketing campaign to promote the use of copper and a technological effort to seek new copper products. His presentation was followed by a paper from Juan Enrique Morales, President of Chile’s Institute of Min- ing Engineers. Morales noted that the Chilean government lacks a long-term mineral policy and called for the for- mulation of such a policy, providing a glimpse of its possible contents. He said this policy should be coherent with other sectors of the domestic economy, it should be capable of being applied across the board to small- medium- and large-sized opera- tions, and it should remain stable in

time. As far as a production policy goes, he argued against Schindler and Herrera saying that Chile should not expand capacity, but rather stick to present production levels to avoid further price declines.

Carlos Rodriguez, Chief Economist of the National Association (Sonami) agreed with Morales on the need to avoid overshooting capacity. He said when the news arrived in the metals exchange that Chile was increasing production, speculators moved out of copper affecting its price. This last presentation initiated a heated debate over production policies with the in- tervention of all the speakers.

The conference was closed by CESCO’s executive director Jorge Bande, who noted that this was the first time in Chile that a broadly-based group of private and governmental institutions had met to discuss copper development alternatives. Bande said that the seminar had given rise to a heightened awareness within the in- dustry of the need for immediate action in the field of promotion and announced the formation of a task group in Chile to suggest policies to the government concerning Chile’s role in the copper industry. The pro- ceedings of the seminar will be pub- lished by CESCO with the support of the Friedrich Ebert Foundation that also helped finance the event. For more information, contact CESCO, Lota 2267, of 204, Santiago, Chile.

Juan O’Brien CESCO

Santiago

very strong grasp of the quantitative techniques such as calculus of varia- tions, optimal control, econometrics

THE !==~NOMICS OF FORESTRY and Markov chain stochastic proces-

ANDNATURALRESOURCES ses; the second, which is less explicit,

Per Olov Johansson and Karl Gustav is a belief that the complex and

Lofclren sensitive issues of forestry can be best

Book review

Basil Blackwell, Oxford, UK, 1985, handled by neoclassical models. These

305 pp, f29.50 assumptions narrow down consider- ably the readers the book will attract.

There are at least two requirements The intention here is not to criticize besides an interest in natural resources the relevance of neoclassical models itself before a reader can appreciate and quantitative techniques in analys- fully this largely theoretical work from ing natural resource issues, but only to two Swedish forest economists, mention that when a work is published Johansson and Lofgren. The first is a in volume form, one expects its con-

RESOURCES POLICY March 1986 79

Conference reporrslBook review

tents to appeal to readers beyond the academic researchers who, after all, have access to a range of academic journals incorporating models with their attendant proofs. One of the aims of a book on forestry economics, particulary from the academic profes- sion, should be to bridge the com- munication gap between the

academics and the policy makers who have less time and opportunity to be exposed to intellectual scrutiny of the subject. This book will hardly be one that the non-academician will find readable.

Many dimensions

A problem of reviewing this book is that it covers many dimensions of forest economics as varied as optimal rotation criteria, welfare rules for forestry, cost-benefit propositions for forestry under unemployment, max- imization of expected utility of a risk averse forester and many more. It is deep in some parts, superficial in others, and very demanding. If there was a common thread that guided the reader from one issue to another, the task of absorbing the contents would have been much easier. There is not even a concluding chapter that brings the disparate aspects of the various chapters together. The preface is no substitute as it is only a trailer of what to expect. While the first seven chap- ters flow in a reasonably cohesive manner, the last six seem to be dispa- rate and lumpy. It appears as if the authors have been over-burdened with their research material, which might have been at home in a book of readings rather than being separated into various sections and chapters under the umbrella of the book’s title.

Under these circumstances, the re- viewer is forced to pick and choose those issues that he is competent in and feels are important, leaving the verification of the individual models and proofs to those readers who have the knowledge and time to scrutinize the various equations to judge their veracity. It has to be mentioned, however, that the various research pieces show analytical depth and de- dication to the subject in their own terms.