During 2020, the mining sector was dented by economic turmoil hindering prices (only copper and iron ore averaged higher in 2020) and government regulations restricting output.
The global mining industry value fell by an estimated 6.2% y-o-y from $802 billion to $752 billion with the impact on mining sectors ranging widely from severe contraction to moderate growth, Fitch Solutions notes in its latest industry report.
In 2021, Fitch forecasts the global mining industry value to recover slightly by 0.5% y-o-y and notes that growth across countries is widely dispersed. Some countries will see growth rebound from restrictions such as Peru, Fitch says, while others will continue on structural declines that were accelerated by the pandemic.
The growth outperfomers, Fitch predicts, will mostly be in Latin America or Africa on both an absolute industry value growth basis and a percentage change y-o-y basis.
Markets in these two regions, especially Latin America, have greater exposure to copper, prices of which Fitch sees averaging at a seven-year high in 2021. This benefits markets such as Peru and Chile which are the two largest producers as Fitch expects an uptick in both prices and production.
These regions also have a greater number of smaller markets, Fitch points out, which allows the percentage growth rate in the mining sector to be higher relative to larger mining sectors.
In Angola, Fitch forecasts growth of nearly 315% y-o-y in 2021, driven by a return of output in the diamond sub- sector which the analyst estimates took a 75% hit in 2020 due to covid restrictions. Despite this large growth rate, the country’s mining sector is still relatively small at roughly 3% of Chile’s mining industry value.
In these markets, growth in both average copper prices and production is generally underpinning outperformance in mining industry value growth, notes. The former will allow mining sectors with greater exposure to copper will make a larger a value-add contribution to GDP as greater revenues are generated, Fitch says.
Copper prices have been on a substantial bull run, which led Fitch to revise up its copper price forecast to $6,800/tonne in 2021 a significant jump compared to the $6,197/tonne average realised in 2020.
On the latter, a number of countries are expecting to bring online or ramp up new copper mining projects in 2021. This trend is particularly strong in budding mining sectors in Ecuador and Panama as both ramp up new projects that were brought online in the past two years but ramp ups were delayed due to covid.
(Read the full report here.)