Moody’s Investors Service has changed its global Metals & Mining outlook to stable from negative as business conditions have modestly improved in the US and Europe and China ́s reopening of the economy supports demand for base metals, steel and coal.
Despite the change in the outlook, Moody’s maintained its 12-month price assumptions and medium-term sensitivity ranges for all commodities except coal.
“We are changing the sector outlook to stable from negative because credit fundamentals will not deteriorate over our outlook period, but will remain volatile, and in certain cases will improve,” Moody ́s Investors Service senior vice president Barbara Mattos said in a news release.
“EBITDA will decline for the roughly 40 largest rated metals and mining companies during the coming 12 months on a rolling 12-month basis but this decline reflects an anomalously high base of comparison, not a weakening of fundamentals,” Mattos said. “Metal commodity prices will remain volatile and historically high during the outlook period responding to economic growth and activity indicators in China and major economies.”
Base metals show signs of improving demand while tight inventories support their prices; aluminum prices will persist above the historical average through early 2024, based on, among other factors its expanding role in clean-energy; copper’s historically low inventories and ongoing industry supply disruptions will support its price; nickel will be in surplus in 2023, but incremental growth in demand from electric vehicle market will create supply deficits, while zinc prices will be supported by tight supply, low inventories and higher energy costs displacing high-cost producers, Moody’s said.
Prices for iron ore will ease further through at least early to mid-2024 as world supply gains start to outpace demand, Moody’s said, adding that reduced production guidance 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 steel demand will likely weaken through the year as higher interest rates mute growth in steel-consuming.
An expansion in India’s steel production and improving economic conditions in China will support met coal prices in 2023, offsetting some risk to demand elsewhere, according to the report. Thermal coal prices will exceed historical averages through early 2024, but the record prices of 2022 were unsustainable.
Moody’s said precious metals will generate strong demand but also involve high production costs while and platinum group metals remain steady.
The full report is here.