JOHANNESBURG (miningweekly.com) - The global mining industry’s value and production growth outlook for 2017 will gradually improve over the course of the year as metal prices are likely to trend higher over the coming quarters, according to Fitch Group research arm BMI.
“We maintain a positive view toward metal prices over a 12-month horizon, boosted by improving supply and demand fundamentals, as well as rising global inflation,” BMI said in a statement released Wednesday.
The firm emphasised, however, that the industry's recovery would be slow and that it would face challenges in key mining markets owing to political ﬂashpoints and regulatory risks.
Moreover, the broad-based 2016 rally in commodity prices means that BMI is sceptical that spot prices will be significantly above end-2016 levels by the end of 2017.
The firm highlighted two factors that would prevent a more sustained rise in prices.
“First, we expect the positive impact of stronger Chinese demand on global commodity prices to wane,” it said, explaining that, in 2016, stronger economic activity in China and associated commodities demand were central to the broad-based commodities-price rebound.
Secondly, BMI believes the positive impact that US infrastructure stimulus will have on metal prices has already been priced in for 2017. However, the firm expects both the scale of President-elect Donald Trump's touted infrastructure package and its impact on US metal imports to disappoint.
Meanwhile, BMI forecasts that the longer-term outlook for metal prices will remain stable rather than face any significant rebound, prompting a gradual recovery in mining industry value.
“We forecast the value of the global mining industry to return to modest growth in 2017, increasing by only 0.7% year-on-year, and to accelerate thereafter to 2020.”
An average growth rate of 13.5% between 2017 and 2020 will represent a significant improvement from the previous four-year decline of 9.4%, though the growth rate remains well below historical highs of multiyear double-digit growth rates.
In general, BMI forecasts that most mining companies will see better performance and financials over the coming years as most commodity prices have now bottomed.
“In 2017, in particular, China's continued fiscal support to the economy, which will buoy spending in public infrastructure, will continue to boost investment in industrial metals in general.”