Moody’s Raises Global Metals and Mining Outlook to Stable
Ratings agency Moody’s Investors Service changed its global outlook for metals and mining from stable to negative as trading conditions improved slightly in the United States and Europe and the reopening of the Chinese economy supported demand. base metals, steel and coal.
Despite the change in outlook, Moody’s maintained its 12-month price assumptions and medium-term sensitivity ranges for all commodities except coal.
“We are changing the outlook for the sector from stable to negative as credit fundamentals will not deteriorate over our forecast period, but will remain volatile and in some cases improve,” said Barbara Mattos, vice president senior of Moody’s Investors Service, in a press release.
“EBITDA will decline for the approximately 40 largest rated metals and mining companies over the next 12 months on a rolling 12-month basis, but this decline reflects an abnormally high basis for comparison, not weakening fundamentals,” it said. Mattos said. “Commodity metal prices will remain volatile and historically high over the forecast period in response to economic growth and activity indicators in China and major economies.”
Base metals show signs of improving demand as tight inventories support their prices; aluminum prices will remain above the historical average through early 2024, based on, among other factors, its growing role in clean energy; historically low copper inventories and continued industry supply disruptions will support its price; nickel will be in surplus in 2023, but gradual growth in market demand for electric vehicles will create supply shortfalls, while zinc prices will be supported by tight supply, low inventories and higher energy costs displacing high-cost producers, Moody’s said.
Iron ore prices will decline further through at least early to mid-2024 as gains in global supply begin to outpace demand, Moody’s said, adding that the reduction in production forecasts from iron ore producers in Brazil and Australia will support prices for at least the first half of 2023.
Moody’s noted that steelmakers will generate historically strong earnings and cash flow in 2023, but economic growth and demand for steel will likely weaken throughout the year as rising interest rates dampen the growth in steel consumption.
According to the report, an expansion of steel production in India and improving economic conditions in China will support coal prices seen in 2023, offsetting some risks to demand elsewhere. Thermal coal prices will exceed historical averages through early 2024, but 2022’s record prices were unsustainable.
Moody’s said precious metals will generate strong demand but also entail high production costs while platinum group metals will remain stable.
