Incrementally stronger prospects for base metals and still-high iron ore, coal and gold prices will be supportive of the global mining sector’s performance in 2022, Fitch Ratings says. Fitch’s neutral sector outlook balances prevailing economic growth expectations with risks from potential negative market sentiment, particularly due to liquidity concerns related to the Chinese property sector, which could affect commodity prices.

Supply-chain constraints and pandemic-related measures will remain themes in 2022 but have less of an impact as economic growth eases across major economies towards longer-term, sustainable levels and as countries gradually reduce restrictions.

We expect copper inventories to remain historically low and transportation issues to persist in 2022, meaning that copper prices will be high but volatile. Energy-transition trends will support long-term copper demand (CRU forecasts the “green” share of copper demand will rise to 20% in 2035 from 5% in 2021).

We anticipate aluminium production curtailments caused by power shortages in China to extend into 2022. Furthermore, uncertain power availability discourages new investment in aluminium production capacity in China, leading to lower longer-term production and a very tight market balance; CRU forecasts global inventories to fall further towards 40 days.

Australia and Brazil should deliver incremental iron ore volumes in the coming years and we expect the market to become more balanced, with a clearly smaller deficit in 2022, moving into surplus by 2024-2025. Iron ore prices should show less volatility and trade closer to supply-demand fundamentals as value chains adjust and bottlenecks are resolved.

The thermal coal market’s supply-demand balance is likely to be restored in 2022. We expect coal prices to normalise in 2022 as the market becomes more rational with looser supply constraints and replenished inventories.

Source: Fitch Ratings