When Will the Ring of Fire Heat Up?

On Friday afternoon, I did a brief presentation at the Impact of Development Conference/Workshop held at the historic Trinity United Church on Algoma Street in Thunder Bay.  My talk (which you can access here under "Looking Back and Looking Forward") was titled "Resources and the Northern and Northwestern Ontario Economies: Past, Present and Future."  Along with a quick survey of the economic history of northern Ontario and an overview of current economic indicators, I also opined on the current state of developments in the Ring of Fire.

For the benefit of those not fully acquainted with the Ring of Fire, it is of course the massive planned chromite mining and smelting development project in the mineral-rich James Bay Lowland region.  The area covers about 5,000 square kilometers but development has been slow.  Major players include Noront Resources, the Ontario government and nine first nations.  There have been a number of challenges including the cost of capital and transportation infrastructure to access the chromite, energy costs,  the lengthy environmental assessment process as well as the process of consultation and negotiation with the nine members of the Matawa Tribal council. You can get a very good detailed analysis of the issues in the Skogstad-Alahmar report here.

However, all of these challenges can be resolved once the real challenge is resolved: commodity prices.  Much of the hype in the Ring of Fire springs from the spike in ferro-chrome prices in the 2008-09 period which was followed by a collapse from which there has yet to be a recovery.  As the accompanying figure illustrates, there was a 60 percent drop in the price of ferro-chrome and the price has not gone anywhere since.



In the end, its all about commodity prices and until the market price goes up and makes the project profitable, not much else is going to happen.