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“The World Of Commodities Has Been Turned Upside Down”

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Clifford Krauss and Ian Austendec, The New York Times

The pain among energy and mining producers worsened again on Tuesday, as one of the industry’s largest players cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities.

The full extent of the shakeout will depend on whether commodities prices have further to fall. And the outlook is shaky, with a swirl of forces battering the markets.

The world’s biggest buyer of commodities, China, has pulled back sharply during its economic slowdown. But the world is dealing with gluts in oil, gas, copper and even some grains.

“The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.”

The pressure on prices has been significant.

Prices for iron ore, the crucial steelmaking ingredient, have fallen by about 40 percent this year. The Brent crude oil benchmark is now hovering around $40 a barrel, down from more than a $110 since the summer of 2014.

Photo

Anglo American’s Los Bronces copper mine, in the Andes near Santiago, Chile. The mining company said it would reduce operating costs over the coming year by $1.1 billion.CreditIvan Alvarado/Reuters

Companies are caught in the downdraft.

A number of commodity-related businesses have either declared bankruptcy or fallen behind in their debt payments. Even more common are the cutbacks. Nearly 1,200 oil rigs, or two-thirds of the American total, have been decommissioned since late last year. More than 250,000 workers in the oil and gas industry worldwide have been laid off, with more than a third coming in the United States.

The international mining company Anglo American is pulling back broadly, with a goal to reduce the company’s size by 60 percent. Along with the layoffs announced on Tuesday, the company is suspending its dividend, halving its business units, as well as unloading mines and smelters.

The situation has darkened in recent months.

In July, the company outlined plans to cut 53,000 jobs after reporting a loss of $3 billion for the first half of the year. Now, Anglo American plans to reduce its current work force of 135,000, to 50,000 employees.

“Quite frankly we didn’t expect the commodity price rout to be so dramatic and in all likelihood the next six months are going to be even tougher,” Mark Cutifani, the company’s chief executive, said at an investors’ conference on Tuesday. “We have pulled costs out of the business, but we need to do more because prices continue to deteriorate.”

China looms large in the commodities equation.

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