Researched by Industrial Info Resources (Sugar Land, Texas)--The total pipeline of planned capital and maintenance project activity within the Metals & Minerals Industry being tracked by Industrial Info Resources stands at more than 15,900 projects valued at $1.68 trillion, according to the latest data presented at a recent outlook webinar conducted by Joe Govreau, vice president of research for the Metals & Minerals Industry, and Shaheen Chohan, Industrial Info's vice president of Global Analytics.

While not all of this spending activity will move ahead as planned, with some projects being put on hold or cancelled, a continuously improving economic outlook across most markets, and better demand profile, are seeing more positivity coming back into the sector. According to Govreau, Industrial Info is seeing improved spending on industrial infrastructure, such as power generation and transmission, water treatment, oil & gas pipelines, and civil construction in the roads and rails sector, which is having a positive effect on many base and industrial metals and associated materials.

This is supported by continued rebalancing in the supply chain, which has seen a combination of production cuts in both the upstream mining and downstream metals-processing sectors, according to Chohan, and a number of years of pullback in major production-centric capex spending. Chohan said, "We are not quite there yet, but demand fundamentals look better and there is more rebalancing in the market, which is now helping support many metals prices".

While overall capital spending volumes are lower, the number of active projects being tracked by Industrial Info has increased. Govreau said, "The focus over the last few years across both the mining and non-mining sectors has been on the smaller in-plant capital projects aligned to process improvements and efficiency gains to improve the operating margins of working assets rather than wholesale investment in new production capacity as we saw back in the early 2000s." Global mining-related projects that are already started or under construction are up 3% since August 2017. Govreau said he expects mining firms to spend more on equipment and production restarts and capacity increases in 2018, in order to replace mines with depleting reserves and lower ore grades.

Data presented during the webinar showed East Asia, South Asia and North America account for more than 35% of the $1.68 trillion dollars of currently active Metals & Minerals project activity.

Industrial Info's project-tracking data highlights some $302 billion of currently active steel production and associated plant spending that is still active. "There has been much done to try and cut some of the huge production supply overhang over the last few years in the steel markets, but more is needed There is demand out there and major pull factors like China's One Belt-One Road initiative may help absorb some of this, as long as we don't see a wave of new capacity coming back online," according to Chohan.

Govreau added that while China dismantled a large quantity of its illegal steel mills in 2017, reducing capacity by 100 million tons per year, more could be expected as the Chinese government turns its attention to the lower-efficiency mills.

"Nevertheless, we have seen India produce more than 100 million tons for the first time, and the government has initiated a goal to triple steel production capacity to 300 million tons by 2030, which could surpass Japan as the second-biggest producer in the next few years," said Govreau.

Turning to coal mining, the spending outlook remains robust with more than $201 billion currently active and, of this, $164 billion still at the planning or engineering stage. Chohan said, "Despite the continued 'war on coal' and the general decarbonizing of the power generation sectors, certainly in developed markets, demand for coal-fired power still continues to move forward." This view was balanced out by Govreau, who said that the short- to mid-term outlook for coal miners remains decent, but the long-term trend points to declining demand as coal-fired plants continue to retire and the cost and availability of competing liquefied natural gas and lower costs of renewables eat into coal's market share.

Looking at two major base metals, copper and aluminum, there is some $108 billion and $107 billion, respectively, of projects at the planning or engineering stages being tracked with a start date in 2018-19. Govreau acknowledged that both markets continue to face challenges and not all of this spending will move forward as planned, but "copper prices alone have been at their highest levels since 2014 and strong demand fundamentals exist." However, around 70% of the grassroot copper planned spending is currently rated as having a low probability of moving forward as planned.

Chohan said, "We expect to see a degree of project fallout or at best some slippage to start dates. This is not untypical, but there may be some improvement if we see true rebalancing in the market." Likewise, around 29% of the planned grassroot aluminum spending is rated as having a high probability of moving forward as planned.

Similar trends are being seen in the cement market. Govreau said, "The cement industry is experiencing overcapacity in most markets, but there has been considerable consolidation over the past few years, and this has led to a decline in project activity, but demand is expected to increase." There is more than $95 billion of planned cement plant capital and maintenance spending being tracked globally by Industrial Info, but little is currently rated as having high probability of moving forward as planned.

In conclusion, the mid-term outlook for the overall Metals & Minerals Industry does look to be on an upward trajectory. According to Govreau, "Economic drivers for Metals & Minerals projects continue to show improvement in 2018, and commodity prices are on the whole expected to remain firm, barring any major shocks in the market--all of which should translate into more optimism for the project owners."

To access past webinars, please visit Industrial Info's market outlook library. To register for an upcoming webinar, visit our Upcoming Market Outlooks page.

For more information and updates, please subscribe to the IIR blog.

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