![]() Steel demand in some emerging economies continues to be weak. Metal prices are, therefore, projected to decline 14% in 2016 and a 1% in 2017. Given that China is responsible for approximately half of the global metal demand, the slowdown in the world’s second-largest economy will likely hurt commodity prices. ![]() As per the IMF, a faster slowdown in China could have a serious impact on trade, commodity prices and investor confidence, and lead to a more generalized slowdown in the global economy. The predicted rate of growth remains well below 6.9% growth achieved in 2015. The International Monetary Fund’s growth forecast for China is 6.6% for this year and 6.2% for 2017. China’s economic growth has cast a shadow on investors' view of commodities demand and, as a result, brought down demand for metals, leading to price weakness. They are amassing vast copper holdings to capture a greater chunk of the $140 billion global market in a bid to eventually squeeze out high-cost producers just as they did in the global iron ore business.ĭemand in China, that alone accounts for a major portion of the industrial metal demand, has slowed down due to the country's tepid property market and weaker infrastructure investment growth. Rio Tinto and BHP (separately and in joint ventures) plan to mine millions of additional tons of copper. MMG Limited’s Las Bambas mine in Peru is also ramping up production. Peru and Mexico are the main contributors to growth this year with Chile to contribute meaningfully to growth in 2017.įreeport-McMoRan Inc.’s (FCX) Grasberg mine in Indonesia and Cerro Verde operation in Peru, BHP Billiton’s Escondida, the world's largest copper mine and First Quantum's Sentinel mine in Zambia are adding output early next year. Although output from the currently operating mines is expected to improve, growth will be offset by a 6% decline in SX-EW production and the dearth of new major mine projects. In 2017, world mine production is expected to remain flat. World mine production is expected to increase by around 4% in 2016 to 19.9 million tons, benefiting from new and expanded capacity brought on stream in the last two years. This is higher than the deficit of 55,000 tons and a surplus of 20,000 tons for 20, respectively, forecast at its Mar 2016 meeting driven by better-than-expected actual growth so far this year. For 2017, the group expects a surplus of around 160,000 metric tons. Weakening market prices of iron ore continue to hurt miners’ aggregate revenues and margins.Ĭopper: As per the International Copper Study Group (ICSG), markets should remain essentially balanced in 2016. Excess supply over demand, economic downturn in China and severe rivalry between mining giants will keep iron ore prices in check. However, as well-intended as the plans are, they may not be sufficient to balance the demand-supply gap. Vale, too, revealed its expectations of full-year iron ore production coming in at the lower end of the previous guidance of 340–350 million tons. BHP had also followed suit by having stated its plans to cut annual production by 10 million tons to rest at 229 million tons this year. ![]() Rio Tinto has trimmed its target for production next year to between 330 million and 340 million tons, from 350 million tons previously. Hence, Australia, the world's top exporter of iron ore, will gear up for reinforcing its shipments. ![]() They intend to continue exploring for iron ore in Australia ignoring lower growth forecasts from China and weaker iron ore prices, while optimistic about continued strength in iron ore demand over the long term. Iron: The threat of oversupply continues to plague the industry as major iron ore producers, Rio Tinto plc (RIO), BHP Billiton Limited (BHP), Vale S.A (VALE) and Fortescue Metals Group Limited ramped up production in recent years. The Perennial Problem of the Industry: Oversupply ![]() While industrial metals would gain from healthy momentum for growth in automotive and construction, the industry remains saddled by a number of headwinds.īelow, we have discussed some of the key reasons and what investors in the industrial metals sector should be wary of in the coming months as well as over the long term: For the industrial metals industry, demand will remain strong in the years to come given their varied uses. ![]()
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