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An Economic Breakdown Crisis, Not a `Recession': Drastic Fall in Physical Goods Production Worldwide

Oct. 31, 2008 (EIRNS)—A severe contraction in physical economic production is underway worldwide, including closing of capacity across all key sectors, not just output. World agro-industrial capacity, which in recent decades was producing below breakeven internationally, in terms of real needs for national economies, is now on its way down below primitive survival levels, to the phase of complete breakdown and social collapse.

The following items are indicative of the process and patterns, though not comprehensive. In each of the instances reported, the sudden deflationary plunge in commodities prices is frequently cited as the proximate cause of any one particular sector's "downturn"—for some goods, prices have dropped by 50% in only a matter of weeks—but the overall dynamic is not price, and certainly not lack of demand, but the down-spiralling of all essential economic activity due to inaction on the emergency measures of the type proposed by Lyndon LaRouche.

  • Steel. All major producers are cutting back output. Arcelor Mittal is reducing steel production 15% worldwide, with major reductions set for Europe; for example, a 50% output cut at its second-largest production site, near Marseilles.

    China's largest producer, Hebei Iron and Steel Group, said last week that it will cut production a further 10-20% over its prior 20% cutback in September. Already, smaller mills are closing operations outright. In the steel center of Tangshan, in Hebei Province, 60% of the small steel mills have halted production.

    In Russia, Evraz, one of the nation's largest steel producers, will cut production by 25% at its Russian and Ukrainian plants, beginning in November. Severstal, the giant steelmaker, slashed production for October by 25-30% at plants in Russia, Italy, and the USA. Magnitogorsk, Russia's third-largest steelmaker, cut its October production of rolled steel by 15%.

    India's Tata Steel will cut its crude steel output by 20%, or one million tons, over the next three months.

  • Iron ore. Vale do Rio Doce, the world's largest iron ore producer, and second-largest nickel producer, announced significant output cuts to begin Nov. 1. The company, citing a 20% reduction in world steel output, said in October that they will reduce iron ore production by 30 million tons, and cut their nickel output in Indonesia by 20 percent. They are making reductions in other operations at sites around the world, including in production of manganese ore and aluminum.

  • Aluminum. The Aluminum Corp. of China (Chinalco), one of the nation's largest, announced Oct. 2 that it is cutting its electrolytic aluminum production capacity by 18%, as of Oct. 23. Its capacity was 3.5 million tons in 2007, and will be reduced by 720,000. Its action will contribute to a 10% drop in the total production of electrolytic aluminum in China.

  • Copper. In Chile, the world's largest copper producer, panic is reigning over the plunge in copper consumption internationally. The nation produced 10% less copper in September than a year earlier. Excondida, the world's largest copper mine, owned by BHP Billiton, is cutting processing capacity.

    The biggest copper processor in China, a subsidiary to the Aluminum Corp. of China, announced that it will produce far less than capacity this year. Its output might reach only 105,000 tons of copper products, when capacity is 120,000 tons. The company is Chinalco Luoyang, based in Luoyang, Henan Province.

  • Zinc. In North Korea, zinc exports to China have been almost the only foreign revenue producer, and are now cut back drastically.

    In Bolivia, in the major mining province of Potosi, 80% of the region's zinc and silver mines are out of operation at present. The workforce of 25,000 has been cut in half. Where are the miners to go? Many are seeking to resume farming which they left years ago; they are planting potatoes, since the shutdown occurs during seeding season. It is reported that some miners are asking to be sent to the Chapare to join the ranks of coca producers, as occurred during the 1980s, when Jeffrey Sachs was economics adviser to then-Finance Minister, and later President Sanchez de Lozada.

    In Canada, zinc mining operations will be suspended in British Colombia (Myra Falls) and Quebec (Langlois) by Breakwater Resources, the company announced Oct. 28.

    In Russia, Chelyabinsk Zinc, the nation's largest producer, will cut 2009 output down to 150,000 tons, from 165,007 tons of zinc and alloys in 2007.

  • Tin. There is a big decline in world consumption, especially in the United States. Of world production in recent years, Indonesia accounted for over 30%, and China 40%. Now, smelters everywhere are sharply cutting production. Whereas in 2005 Indonesia produced 137,000 tons; in 2007 this was down to 102,000; this year maybe only 80,000 tons will be produced.

  • Lumber. North America. One of the biggest producers on the continent, West Fraser Timber Co., in Vancouver, announced this week that its output has been down 13% in the recent period. The decline in forestry overall has been going on for two years, but in recent months, turned into a bust because customers cannot get credit.

  • Wallboard. In the United States, the output has been at 60% of capacity over the past 12 months.