Business Cycles And The Outlook For Industrial Minerals

The consumption of industrial minerals, like most other commodities produced from the earth, depends on the demand for the goods and services that use these materials. Minerals are not generally used directly by final consumers (table salt is a notable exception) but instead are used to either make products that are then purchased by customers, or the minerals are used to make industrial products that eventually contribute towards producing other goods and services. Therefore the demand for industrial minerals in most uses is derived from the ultimate demand for goods and services by consumers. The problem for producers of industrial minerals is that the demand for their mineral product fluctuates greatly in response to the changes in the production of goods and services over the course of the business cycle. In this respect, the producers of industrial mineral are innocent victims, subject to market fluctuations outside of their control. Because the demand for most minerals depends on the demand for the product and because minerals typically make up a minor portion of the costs of producing the product, changes in the price of the mineral often do not influence demand for it to a significant degree in the short run. This is described as a very low price elasticity of demand, as shown by the steep slope of the hypothetical demand curve in Figure 1. This demand curve shows that changing the price of the mineral does not alter the quantity demanded very much, but shifts in the demand curve will be the important determinant of the quantity of the mine.ra1 that is sold. The shifts are caused by the changing demand for the products using the mineral over the course of the business cycle.