Mining Outlook Webinar in Review: Sector Expected to Slowly Improve
In Industrial Info's recent Global Mining Outlook webinar, Joe Govreau, vice president of research for the Metals & Minerals Industry, discussed some of the key trends in the global mining sector. While the sector has seen an overall dip in project spending in recent years, spending may be improving as commodity prices strengthen and demand grows. Industrial Info is tracking $179 billion in mining projects under construction and another approximately $1 trillion that are in the planning and engineering stage.
Govreau noted five of the top ten countries for mining project spending are located in the Americas. Canada is the world's top spender. The U.S. is sixth, while the South American countries of Peru, Brazil and Chile are all among the top 10 spenders. Asia (primarily China) and Africa are also strong players in global spending. "We're seeing increased activity in Africa as Chinese, Indian, Australian and Canadian investment looks to shore up long-term resource supply by investing in mines and infrastructure," said Govreau.
Despite the strength in the global mining sector, it is not nearly what was a few years ago. In 2014, Industrial Info was tracking $636 billion of mining projects under construction. This number has shrunk to $179 billion in 2017. This comes despite the fact that there are actually more projects this year than in 2014. Govreau said, "Big projects, mainly grassroot mines and large expansions are fewer and are being replaced with smaller-value projects." For the top six mining firms, capital expenditures are about one-third of what they were at the peak of 2012. "Capex focused on production optimization and efficiency projects over the past year or two, as well as energy reduction, automation and environmental projects. We do see some scattered large projects moving forward, especially from majors who have long-term plans to replace capacity from depleting and increasingly low-grade mines," said Govreau.
Coal remains the top mining commodity, with $133 billion in projects planned. The main areas for coal mining are China, Africa and India. China remains the world's largest coal user, consuming about half of the world's coal. While coal mining is expected to increase somewhat this year in the U.S., this is due primarily to coal exports, rather than increased domestic coal consumption. Govreau said, "In the U.S., pro-coal policy regulatory changes, such as the replacement plan for the Clean Power Plan could benefit coal miners in the U.S., but regardless of policy changes, market forces are driving power generators to natural gas and renewables."
Govreau discussed how other markets impacted mining projects. The energy storage and electric vehicle markets, for example, are benefitting mining projects for cobalt, lithium, nickel and zinc. "Probably the most interesting development in the U.S. right now is the boom in activity for frac sand in Texas. There's more than $1 billion of frac sand mining projects being developed in Texas right now, all to support increased oil drilling going on in the Permian Basin. Drilling companies are using more sand and finer sand that is found in West Texas, and there's a race right now to see who can build their mines and get to market first," said Govreau.
While the spending outlook for many commodities remains lower than in past years, the outlook seems to be improving. "We're definitely seeing commodity price and demand fundamentals improving after bottoming out at the beginning of 2016," said Govreau. "Mining firms' cost-cutting efforts and productivity optimization over the past few years are starting to bear fruit, which I forecast will lead to stable to moderate growth and capital expenditures over the next two years." Govreau said mining firms will continue to pursue projects with a stronger return on investment, especially in energy reduction, automation, environmental and process improvements.
To listen this this and other market outlooks, visit Industrial Info's market outlook library, containing previous webinars, including those on the Power Industry, Pharmaceutical & Biotech, Oil & Gas and more.
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