Mining In Austere Times: Winners & Losers
BMI View: While global mineral production growth will generally soften alongside the economic slowdown in China, there will be significant variation between commodities. Notably, the coal and iron ore sectors are in for greater production expansion compared with other minerals. Below, we discuss the outlook in the different mining sub-sectors, underlining the key trends at play in the production of each mineral over the coming quarters.
The global mining industry is girding itself for a protracted period of austerity as the downshift in the Chinese economy is set to drag on mineral prices over the coming quarters. Mining companies are struggling to right their ships having been battered in 2013 by a combination of weakening prices, rising cost pressure and in some instances, significant domestic challenges. Therefore, our production forecasts incorporate scepticism as to whether projects announced by miners across the spectrum will come to fruition in the coming years.
The coal and iron ore sectors are in for better fortunes compared with most other minerals. Resilient demand for thermal coal in Asia will continue to fuel growth in the coal sector while low cost mining operations in Australia provide a firm platform for further increases in iron ore production. Indeed, we expect these two minerals to lead the bulk of increases in global tonnage over the coming years. Crucially, this will have significant implications on not just mining servicing firms, but also the dry bulk shipping sector. Around 4bn tonnes (bnt) of dry bulk cargo (predominantly coal, iron ore and grain), or one-third of all international seaborne trade, were transported by sea in 2012.
|More Losers Than Winners|
|Global Mine Production - Average % chg y-o-y|