"Increased M&A activity will result from continuing volatility in the mining sector, say 57 percent of our survey respondents. I am not surprised.
For a while, we've seen vertical integration within the sector as commodity traders attempt to hedge against spikes or falls in prices by taking stakes in mining assets.
At the same time, however, there are significant efforts to block M&A deals that could lead to monopolies. Governments, notably in high-growth economies like China, where copper and iron ore are essential for industrial expansion, actively petition against M&A deals to ensure security of commodity supply.
Respondents are divided on the likelihood that geopolitical issues, such as the unrest in the Middle East and the oil spill in the Gulf of Mexico, will dramatically alter short-term investment plans.
The fact is that oil and gas companies are accustomed to operating in extremely difficult political circumstances.
Short-term, as agreed by 63 percent of respondents, there will be a hiccup in investment but there is no evidence of companies withdrawing and putting their stakes elsewhere.
Armed conflict may create a hiatus, but with investment taking years to execute and to realize, I believe any long-term impact on the sector will be minimal.
Looking to the renewable energy industry, if it is to become integral to the energy mix, three-quarters of our respondents say government backing is essential.
However, the industry is suffering from a severe misalignment between investment needs and investment terms. Typically, government decision-making is restricted to four years ― a term in office ― whereas energy companies need funding over much longer horizons of up to 30 years.
The overwhelming response to our survey is that governments need to do much more if we are to meet emission targets and find alternatives to fossil fuels."
