Recent comments by Glencore CEO Ivan Glasenberg regarding the discipline, or lack thereof, exhibited by the mining industry certainly ruffled more than a few feathers. Mr Glasenberg was discussing the recent religion being imposed by investors on mining companies with regards to the prudent use of capital. Mr. Glasenberg commented ” What we’ve got to do , when the markets do get stronger, no need to keep building a new asset and let’s keep the market tight for a while… That’s what we’ve got to stop doing as a mining industry. We’ve got to learn about supply and demand”. You are preaching to the choir with us when it comes to a focus on return metrics as opposed to growth, but the explosion of financial players into the commodity markets via ETF’s has shifted the demand dynamic making capacity decisions much more complex. Consider the aluminum market where a prolonged contango has kept the market in an artificially tight supply dynamic, much to the chagrin of producers who would prefer to see some actual production taken out of the market. UC Rusal CEO Oleg Deripaska wrote of such distortions when he stated that ” capital flows driven by index investors and hedge funds in particular, have distorted the supply/demand equilibrium, sending the wrong signal for the players in the market”. While it is true that traditionally most mining companies never met a project they did not like (during periods of rising prices), but one must temper any criticism one might have of them with the reality that pricing in most exchange traded commodity markets is increasingly driven by non-commerical players and thus not reflective of real underlying fundamentals.