The Outlook For Global Mining In 2013

A renewed slowdown in Chinese economic growth in the second half of 2013 will be the key theme in the mining sector this year, negatively affecting worldwide metal demand, mining company revenues, and key projects. Ongoing problems in the eurozone will also ensure that mining equities will face a challenging environment over the course of 2013. Although our metal price forecasts are below consensus, we still expect prices to remain elevated by historical standards, and this underpins some of our key views on the mining sector, which are summarised below:

  • We expect mining industry expansion in Latin American countries such as Mexico and Colombia, but we expect to see further problems in Argentina due to business environment concerns.
  • We anticipate slower Chinese growth by H2 2013, which will weigh on mining equities. Continuing problems in the eurozone will also push mining shares lower. Companies that are well diversified, such as BHP Billiton, should outperform.
  • Capital expenditure will continue to fall, limiting investment in greenfield projects and affecting mining services companies such as Caterpillar, Joy Global, and Atlas Copco.
  • Africa will continue attracting Chinese investment. West African countries such as Sierra Leone and Guinea have enormous high-grade iron ore reserves which are still crucial for China’s infrastructure plans.
  • The global coal trade will shift, with the US in particular becoming a major net exporter of coal. This will favor firms such as Peabody Energy.
  • The mining industry will see further consolidation, which will have the effect of limiting greenfield investment.
  • Frontier markets with improving political environments and major mineral reserves will continue attracting investment. We highlight Mongolia, Mozambique, and Sierra Leone.

Our full feature on global mining, as well as our forecasts for a wide range of commodities, is available to subscribers at Business Monitor Online.