Following on a year of record profitability and revenue in 2021, the outlook for miners and metal players remains positive in 2022.According to analysts at Fitch Solutions, global mineral and metal production is likely to rise this year, while capital expenditure continues it s recover y.“Although we forecast most metal prices to average slightly lower in 2022, they will remain elevated by historical standards. Some, including lithium and tin, will even head higher,” reads its outlook report. “New opportunities to benefit from the green transition are emerging, and players in the sector will increasingly position themselves towards this sphere. We will see progress in the steel-hydrogen sector and battery-related minerals, among others.”Mining, however, continues to face some key risks in the months ahead, of which the biggest remains the resurgence of Covid-19 and the disruption this would bring to operations. There is also the potential for weaker-than-expected economic growth. Another challenge facing the sector is that of increased government intervention in emerging and developed markets as the race to control critical and strategic minerals for the green and digital economy increases.Fitch Solutions forecasts that all mineral and metal prices will average slightly lower in the coming months on a year-on-year average basis, as global supply improves to loosen the market while demand stabilises compared to 2021. “Lithium, coking coal and tin miners will be the winners as we see prices of these commodities averaging higher in 2022. Iron and steel are expected to underperform in 2022, but prices will still remain elevated compared with historical levels.”The mining and minerals sector overall is expected to see profitability remain elevated. “Still elevated metal prices, coupled with an increase in production across commodities this year, will help mining and metal companies’ financial performance remain strong. Capital expenditure in the sector has been on a strong recovery trend in 2021, which is likely to continue. However, overall investment will remain well below the levels seen during the commodities supercycle up to 2012/13 as miners remain cautious following capex overruns and sharp increases in debt over the past investment cycles, and increasingly strict environmental, social and governance requirements make developing new projects difficult.”The outlook for miners with green transition-linked assets and first movers in lower-carbon steel operations is far more positive than for those miners linked to the commodities that are in decline, such as thermal coal, especially as expectations are high to see an acceleration in the transition to green economies.“This will increasingly lead to more and more large mining companies leaving the coal market or reducing production,” reads the report.It says while metals remain a critical input for green transition technology, including renewables and batteries, the mining sector’s social licence to operate is increasingly being eroded amidst rising public opposition to mines. “This contradiction will come in the spotlight in 2022. It will add momentum to alternative mineral extraction projects, including recycling. In countries where mining is facing stronger public opposition, it could also lead to a slowdown in new mine projects’ progress and to higher-for-longer metal prices in the long run.”Mining continues to face some key risks in the months ahead, of which the biggest remains the resurgence of Covid-19.– Fitch Solutions report
