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Gold, copper prices to rebound in 2019 – Fitch Solutions

23rd January 2019

By: Nadine James

Features Deputy Editor

     

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JOHANNESBURG (miningweekly.com) – Increased economic uncertainty and declining metal stocks are expected to drive gold and copper prices this year, Fitch Solutions commodities analyst Sabrin Chowdhury stated during a webcast on Wednesday.

She noted that the expected rebound in gold was “already playing out” and that the price should reach 2013 highs, averaging around $1 300/oz this year, with investment flows into safe haven assets increasing as dollar strength, market volatility and the trend toward protectionism continues.

Further, tensions between the US and China will force the latter to modify its metals production and consumption; however, Chowdhury did not expect the trade dispute to significantly dent the positive outlook on Chinese metal demand. 

Nonetheless, she cautioned that a protracted conflict with the US would prove ever more challenging and concerning in terms of economic sentiment and price fluctuations.

Chowdhury added that, while precious and nonferrous metals were “poised for some upside,” the outlook for ferrous metals – particularly ferrochrome and manganese –  was neutral, while liquefied natural gas and coal prices were expected to dip.

INVESTMENT  

Investment would remain subdued owing to mining majors continuing to refrain from large capital expenditure (capex) projects, noted Fitch Solutions commodities analyst Diego Oliva Velez.

He noted that Fitch expects capex spend this year to target the introduction or implementation of advanced technologies, which companies have already prioritised in an effort to better withstand price volatility, or for exploration and expansion projects with characteristics too attractive to ignore.

Oliva Velez added that, as a means of avoiding unnecessary risk, a large majority of the global mining sector’s exploration spend would be on projects or prospects in developed countries with stable governments and consistent policies, particularly Australia, Canada and Chile.

He also pointed to increased merger and acquisition activity, particularly between gold miners, as companies try to expand their reserves without taking on too much additional risk.

MINING EQUIPMENT

Oliva Velez said the rapid urbanisation and rising mineral prices supported the development and “solid growth” of technologically advanced, “greener” mining equipment.

He expects a greater focus on upgrading and retrofitting older machinery this year, as well as the further integration of smart technologies in existing products.

Further, while underground equipment only accounted for 40% of all mining equipment revenue in 2017, Oliva Velez expects its market share to grow as surface reserves decline.

Additionally, Asian and Latin American miners would remain the largest equipment consumers as increasing urbanisation and industrialisation drive base metals and coal consumption in these regions.

ELECTRIC VEHICLES

Finally, Oliva Velez expects battery metals to continue to drive metals demand, but noted that he expected Chinese manufacturers to shift from producing lithium ion phosphate (LFP) cathodes to lithium/nickel/manganese/cobalt oxide (NMC) cathodes –  the latter being more expensive but more efficient in terms of range.

He expects the increased uptake of NMC-based batteries (comprising about 60% nickel) to continue beyond 2019 and eventually eclipse that of LFP batteries by 2027.

This would impact on the exploration, extraction and sale of nickel.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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