Mining industry shows better outlook until 2022 (Report)
Global miners can continue to expect “bumper year of earnings” through 2022, as large rise in commodity prices underpins strong financial results for most players, new report from Fitch says Solutions .
Despite very high profits, Fitch expects miners to keep capital spending under control, focusing instead on further debt reduction with the additional profits generated this year and next.
According to the report, the industry is in an era of technological upheaval, changing consumption patterns, and environmental, social and governance (ESG) considerations that shape the future of market players and inevitably determine success. – or the contrary.
Large mining companies may weather the covid-19 pandemic better, mainly thanks to higher metal prices after Q1 2020. For example, Rio Tinto’s net income (NYSE: RIO; LSE: RIO; ASX: RIO) has grown by 22% per year. year-on-year in 2020 compared to a drop of 41% year-on-year in 2019, while Anglo American (LSE: AAL), Freeport-McMoRan (NYSE: FCX), Norilsk Nickel (US-OTC: NILSY) and Vale (NYSE : VALE) net profits recorded.
Based on performance, the miners had announced in recent months higher forecasts for production and capital expenditures in 2021 and 2022 compared to 2020. In April, the prospects for mining investments semi Fitch predicted growth investments of the first 30 miners. around 23.7% year-on-year in 2021, after stagnating broadly in 2020.
Mining and metallurgical companies are also likely to try to extract value from sustainability trends, Fitch says , as there will be pressure on mining companies to decarbonize, reduce their environmental impact and improve. transparency.
This pressure will increase considerably in the years to come, as downstream actors aim to reduce Scope 3’s greenhouse gas (GHG) emissions.
According to McKinsey & Co, mining is responsible for 4% to 7% of global GHG emissions relating to the sector’s Scope 1 and Scope 2 emissions. By comparison, the inclusion of Scope 3 emissions ties the industry to around 28% of total global emissions, according to Fitch .
Therefore, the agency expects early players in this regard to receive a premium for their products in the future, as downstream players demand low-carbon metals.
Mining investments will continue to target cutting-edge technologies that provide additional efficiency gains, as industry leaders prioritize technology to stay competitive and better resist price volatility.
