Resources Policy 26 (2000) 61–67
www.elsevier.com/locate/resourpol
Book reviews
Inside Mining: The Economics of the Supply and
Demand of Minerals and Metals
Phillip Crowson; Mining Journal Books, London, 1998,
hardcover, ISBN 0-900117-86-9
After a quarter of a century working as economist for
a major mining company, the author has contributed this
volume with his insights into the way that mineral mar-
kets (apart from those in the oil and gas sector) work.
Though a group of his readers including this reviewer
would have wished it, the author advises in the first para-
graph of the brief introductory chapter that, “this is not
a textbook” but rather a more general introduction to
this complex and dynamic field. Its organization is quite
standard, reflecting the typical structure of a microeco-
nomics text. Four chapters follow the brief introduction.
The first two, respectively on demand and supply, make
up nearly sixty percent of the book. A short chapter on
costs—almost a “theory of the firm” chapter relating to
the mining sector—follows on from this. After reflecting
briefly on market forms, most of the long final chapter
is devoted to a discussion of the evolution and recent
operations of metal and related mineral markets.
While it is based on well-developed economic theory,
the discussion uses the familiar technical framework of
microeconomics texts in only a very limited way. Rather
the discourse is descriptive and industry-focused, placed
where appropriate in a historical context. In certain
respects this adds to the merit of the volume. In others
its detracts, particularly in its failure to utilize the
demand and supply curve framework consistently as a
way of explaining important influences on supply.
Because the volume’s organization differs in part from
the standard paradigm, this means its requires close read-
ing to appreciate the range of insights which the
author offers.
This comment applies clearly to the chapter on
demand. In his shorter standard reference on the eco-
nomics of metal markets, Tilton (1992) uses a familiar
classification of variables when he identifies income, the
price of a mineral, the prices of substitutes and comp-
lements, technology, consumer preferences (fashion) and
government policy as key determinants of mineral
demand. Crowson’s longer discussion covers each of
these variables (except perhaps government policy) but
adds some more. They are population structure, inertia,
the effects of available supply and increasing environ-
mental awareness.
The chapter on supply is in many respects well
organized, with major sections on resources and
reserves, capacity to supply and influences on output,
together with shorter sections on the role of inventories,
secondary supply and barriers to entry. The section on
resources and reserves provides an engaging introduc-
tion to the economic and technical issues which influ-
ence the exploitation of minerals. Focusing initially on
the ‘McKelvy Box’, Crowson considers the issues of
geological certainty, feasibility of economic recovery
and accessibility of prospective areas as keys to delin-
eation. This should be appreciated alike by science or
business professionals, who want a more complete
appreciation of the finite nature of mineral supply. The
‘Capacity to Supply’ section has a similarly useful dis-
cussion of the technical and economic factors influenc-
ing the supply of minerals from mines and mills. The
author importantly stresses how the nature of the mining
cycle and previous short-term business survival stra-
tegies often perversely affect short-run new mineral sup-
ply when prices begin to rise. He then proceeds to con-
sider the more complex area of by-products and co-
products, noting how this status brings greater inelas-
ticity of supply. The evolution of supply sub-section pro-
vides an appropriate completion to the capacity to supply
discussion, highlighting how the dynamic nature of sup-
ply is influenced by a variety of negative influences such
as closures, temporary shutdowns, and erosion of a
mine’s capacity to produce, as well as positive factors
such as reopenings, expansions and new mines. The bal-
ance between the seven components varies during the
course of the business cycle. In the ‘Influences on Out-
put’ section, Crowson finally provides a reasonably stan-
dard economics textbook type exposition of the variables
which influence mineral supply. They include the price
of a mineral, the cost of inputs, the rate of inflation and
exchange rates, investment and innovation (technology),
economies and diseconomies of scale, environmental
considerations, government regulations and temporary
disruptions (including strikes, natural disasters and civil
disturbances). The short sections on secondary supply
and barriers to entry provide an appropriate complement
to this discussion.
The exposition moves smoothly from supply to costs
in Chapter Four, which has two major sections. The first
is on the definition of cost. The detailed consideration
of cash costs (the basis for the familiar cash cost—a
form of the short-run supply curve) is informative and
62 Book reviews / Resources Policy 26 (2000) 61–67
this leads to the more complicated area of cash break-
even costs, where the effects of co-product and by-pro-
duct credits come into play. The discussion here begs
the question of the need for a synthesis to make this
important area clearer. The sub-section on “Pitfalls in
Cost Comparisons” adds a practical analytical dimension
to the preceding discussion and discussion of full costs
provides a suitable conclusion to this section. The short
second section—on changes in an industry’s costs over
time—complements the initial section well.
As noted in the introduction, the final chapter on mar-
kets and prices begins by considering the structure of
markets. The author notes that the markets for the non-
ferrous metals and precious metals exhibit many of the
features of competitive markets, but that for other min-
eral products, oligopolistic markets are more common.
He uses a discussion of commodities and specialties and
of prices over the product life cycle to complement this
exposition. The section on producer pricing provides a
useful historic and practical introduction to the reality of
the development of mineral markets. It leads naturally
to a quite detailed discussion of terminal markets, parti-
cularly the London Metal Exchange. Notwithstanding
the existence of terminal markets as guides, most sales
occur under contracts between producers and fabricators.
Crowson describes the general nature of such contracts.
The marketing situation is complicated by the nature of
production and processing which occurs and the extent
of integrated operations. He notes that processing is
more likely to occur near to mines but that tariff regimes
complicate this. New smelters and refineries often appear
about twenty years after a mining industry has been
established in a new location.
The issue of whether production should be integrated
is important for a project’s profitability. Where transport
costs are a key issue, as in the case of remote inland
mines, integrated operations are more attractive. It is less
of an issue when mines are close to deep water ports
(good applied location economics). After considering a
series of standard arguments for and against integration,
the author reflects on the reasons that new entrants have
negotiated the high entry barriers to produce metals. He
notes as well the often favorable economics of expan-
sions to established smelters and refineries. The quite
long section on sales contracts then provides an
important practical description of the reality of doing
business in mineral markets. The final three short sec-
tions reflect on price movements and the factors which
influence them.
Inside Mining is a worthy new contribution to the
mineral economics literature. While it is not a textbook,
it will be used as one for specialist courses on mineral
markets. There are few if any other contributions which
are so complete. Notwithstanding this strong recommen-
dation, the organization, presentation and price of the
book all leave something to be desired. Though many
diagrams illustrate important arguments well, their pres-
entation is uneven. It also seems that the volume would
have benefited from close critical academic review at the
later draft stages. The extent to which this occurred was
not clearly apparent to this reviewer.
Philip Maxwell
Mineral Economics program, WA School of Mines,
Curtin University of Technology,
GPO Box U1987,
Perth, WA 6845, Australia
Reference
Tilton, John, 1992. Economics of the Mineral Industries. In: Hartman,
Howard (Ed.), SME Mining Engineering Handbook pp. 47–62
PII: S 0 3 0 1 - 4 2 0 7 ( 0 0 ) 0 0 0 0 4 - 0
Global Energy Perspectives
Nebojsa Nakicenovic, Arnulf Grubler, and Alan Mac-
Donald (Eds); Cambridge University Press, 1998, 299
pp., US$27.95 paperback, ISBN 0-521-64569-7
This book is an exercise in scenario building.
Developing from the World Energy Council’s study of
1993—Energy for Tomorrow’s World: the Realities, the
Real Options and the Agenda for Achievements—Kogan
Page, London—six scenarios are built which examine
energy use in eleven regions up to 2020 with some
extensions to 2100. There are three basic cases: “High
Growth” with three versions; “Middle Course”; and
“Ecologically Driven” with two versions. After a brief
description of these scenarios, the book presents an over-
view of past and present energy needs together with an
extensive discussion of the determinants of future energy
needs. The book then outlines the alternative energy sys-
tems in each of the scenarios together with the impli-
cations for financing, trade, supply costs, technology, the
energy industries and finally the environment. The
energy systems are then re-examined on the basis of 11
geographic regions.
The book claims that it is considering the future of
energy systems “... interwoven with broader issues of
human development and... the main driving forces of
change and their implications” (page 241). It also claims
to contain a number of new features which differentiates
it from other earlier blockbuster energy futures studies.
These include integrating changing perceptions about
resources and the environment; technology treated
dynamically; state of the art models describing individ-
ual dimensions of development integrated into one
modeling framework; spatial and temporal dimensions