Good Morning from London,

We are now well into December and the final throes of this tortuous year for businesses around the world. One of the areas that has created the vast fortunes for Russian Oligarchs and hurt the pockets of every man, woman and child on this planet has come down with a crash. The commodities market and in particular the stuff that comes out of the ground has taken a hammering. Take the price of oil it is now below $50 per barrel. Iron ore a key component in the manufacture of steel has had the bottom fall out of the market.

According to market experts we are 5 years into a 20 year commodity boom, however at the moment it does not feel like one and everyone is shorting commodity and businesses whose core activity is in commodities. The stocks of Rio Tinto, BHP Billiton, Ferrexpo and Kazakhmys look as 'cheap as chips'.

So what are these mining and processing companies doing? Many are cutting back expenditure as money to expand operations and increase output dries up around the world. Many efficiency and improvement programs have been cancelled with outside expertise being replaced by makeshift internal teams.

Other companies are stuck with expansion plans and projects that started before this financial crisis, so they face the prospect of oversupply to an already stagnant market. Hence there has been a lot of talk of consolidation and I think there will be a greater need to merge in order to reduce costs and increase synergies between smilar operations. It may be that the commodities bull run will return especially once China and India re-commence their battle for economic supremacy. So those mining companies that have invested in bigger operations could bring them on line as soon as the global demand returns.

With regard to oil, many analysts are saying that the price of oil will roll around the $50 to $100 per barrel for the duration of 2009. Well! to me that's a huge margin to 'roll around' in. In the past 5 years or so many smaller and previously less economic oil wells were brought into production,  but with oil at below $50 these may shut again. However, the word of advice to these smaller producers would be to review your cost base and aim to reducing it, and not necessarily look to a global oil price spike to povide the profits.

So what will companies do? Many will shut operations, fire people and sit the economic turmoil out. Such action stores trouble for later.

Now is the time to be proactive, look at new business models, creative ways to be more cost efficient and increase productivity. Maybe this turmoil is a wake up call to think outside the box and look for more innovative solutions. In my view the free market economy that pretty much has dominates the world is trying the clear out the trash that is within the system. It is the those companies that can think beyond their traditional models and ways or doing things will survive and others will fall by the wayside.

This is free-market evolution at its best.

Shah Alam