Global Industry Overview - Minerals Production Outlook To 2018: In Charts - SEPT 2014
BMI View: Among major minerals, t he production growth outlook for coal and iron ore will be the most positive over our forecast period to 2018, while output for minerals such as platinum and zinc will lag .
We expect the cuts in global mining capital expenditure (capex) since 2012 to continue over 2014-2016. China's seemingly insatiable appetite for industrial commodities over the past decade will abate due to the cooling of Chinese economic growth. As industrial metal prices come under pressure, this will deal a hard blow to many mining firms.
Nonetheless, we expect mining fortunes to vary across the mineral segments. Iron ore majors such as BHP Billiton (BHP), Rio Tinto (Rio) and Vale will continue to capture sizable margins from their low-cost sitting in the global iron ore cost curve. Resilient demand for coal-fired power generation in Asia will also provide some comfort to coal miners in the face of a persistent seaborne glut. In contrast, the production growth outlook for minerals including platinum and zinc makes for grim reading. Labour unrest, cost inflation and reserves exhaustion will continue to impede mining operations for these minerals in the years ahead.
|Select Minerals Production (% chg y-o-y)|
Bauxite: Steady Increase In Sight
We expect global bauxite production to push steadily higher over the coming years. Bauxite ore remains plentiful, with reserves generally shallow and easily accessible through open pit mining ( see 'Bauxite: Growth To Slow, But More Resilient Than Other Minerals', May 1). This will prevent the common industry challenges of declining ore grades and cost inflation.
Furthermore, the bulk of bauxite production lies in the hands of major miners such as Alcoa, BHP and Rio. In contrast to the capital-starved junior players, these majors are blessed with greater financial power to bring their projects towards production.
|Select Countries - Bauxite Production (mnt)|
Coal: Resilient Asian Demand To Support Miners
We believe Asia's continued reliance on coal-fired power generation will continue to support global coal mining ( see 'Thermal Coal: Inventory Overhang Here To Stay', August 21). In particular, supply from Indonesia will increase on the back of growing domestic demand, while production in Australia remains resilient due to 'take-or-pay' obligations.
|Coal To Keep Burning In Asia|
|Coal (as % Of Total Power Generation)|
Furthermore, low-cost mining operations in Colombia will continue to incentivise mining investment, while coal output from Botswana, Mozambique and Zimbabwe is set to boom as a string of projects come online over the coming years.
|Select Countries - Coal Production (mnt)|
Copper: Boom-Time Investment Coming Online
While growth in global copper mine output will slow over the coming years, a legacy of boom-time investment will continue to push production higher ( see 'Copper: Decelerating Output Growth To 2018', August 7).
|Growth To Cool|
|Global - Copper Mine Production & Growth|
Countries including Chile, Mongolia, Peru and China are all sitting on a pipeline of both brownfield and greenfield projects. These include the Escondida mine in Chile, the Oyu Tolgoi project in Mongolia as well as the giant Las Bambas mine in Peru. Supply from the copperbelt regions of Zambia and the Democratic Republic of Congo (DRC) will also increase over the medium term.
|Select Countries - Copper Mine Production (mnt)|
Gold: Still Mining, Despite Price Meltdown
Although the bull run in gold prices is behind us, we believe gold mine output will still increase over the years to 2018 ( see 'Gold: Bull Run Over, But Output Won't Collapse', June 17). First, anecdotal evidence suggests that more miners including African Barrick Gold, Goldcorp and Newmont Mining are targeting the development of high-grade ore in order to improve margins and keep marginal mines afloat. Second, robust gold demand from China will continue to drive gold mine supply globally. Lastly, global mining M&A will pick up due to the depressed valuations of mining assets. This will cast a lifeline to some distressed assets by helping to sustain mine production despite the austerity push in the mining industry ( see 'Mining M&A: Asia & Gold Shine', June 5).
|Against The Tide|
|Gold - Global Mine Production & Prices|
Iron Ore: Booming Supply From The Majors
We forecast global iron ore production to reach 3.7bn tonnes (bnt) by 2018, increasing at a healthy clip of 6.0% per annum ( see 'Iron Ore: Majors To Lay The Groundwork For Expansion', March 27). Major miners in Australia and Brazil will push ahead with a pipeline of expansion plans in a bid to lower cash costs and tighten their grip on the global market. The concentration of high-grade hematite ore (or 'direct shipping ore') in these countries will provide a healthy buffer against falling prices in the coming years.
|Pedal To The Metal|
|Select Countries - Iron Ore Production (mnt)|
Lead: China To Drive Production
We expect annual growth in global lead mine output to fall from an average clip of 6.9% between 2009 and 2013 to 4.5% over the years to 2018. China will account for the bulk of the output increase, with supply from other major producers such as Australia and the US increasing modestly ( see 'Lead: China In Driving Seat', July 1). Crucially, lead mining operations in China will be supported by healthy demand from the autos sector. Lead is used primarily in the production of lead-acid batteries, which accounts for 80% of global lead consumption.
|Select Countries - Lead Mine Production (% chg y-o-y)|
Nickel: Digging Continues At Healthy Pace
We expect global nickel production to increase at a healthy clip of 5.5% per annum between 2014 and 2018 ( see 'Nickel: Still Mining, Despite Downturn', March 25). A pipeline of projects in the Philippines, Indonesia and Australia will continue to bolster supply in the nickel market. Encouragingly, the mining of nickel deposits is far more insulated from the threat of falling ore grades compared with other minerals. Anecdotal evidence suggests that the production of nickel can be sustained at very low grades such as purity levels of 0.1%. In contrast, such grades would make any bauxite, copper or zinc mine economically unviable.
|Global - Nickel Mine Production|
Platinum: Struggles Ahead
We forecast global platinum mine output to contract over our forecast period to 2018, declining at an average rate of 0.2% per annum ( see 'Platinum: Troubled Growth Outlook', July 22). Labour unrest, mine depletion and high power costs in South Africa paint a dull picture for mine production in the world's largest producer. Falling ore grades and a lack of expansion plans in Russia will further drag on the global growth picture for platinum.
|Select Countries - Platinum Mine Production (% chg y-o-y)|
Tin: Modest Expansion
We believe global tin mine production will only expand modestly in the coming years due to tighter environmental regulations, falling ore grades and higher production costs ( see 'Tin: No Boom Years Ahead', April 2). Moreover, the bulk of new projects are still a decade or more from reaching production, according to the International Tin Research Institute (ITRI). This feeds into our view that subdued growth in mine supply, coupled with improving end-user demand, will push refined tin prices higher over the coming years. We forecast prices to average USD24,340/tonne between 2014 and 2018, compared with USD22,298/tonne in 2013.
|Weak Growth Prospects|
|Select Countries - Tin Mine Production (kt)|
Zinc: Subdued Growth Outlook
We expect growth in global zinc mine output to come under significant pressure in the coming years ( see 'Zinc: Production Declines By Late Decade', May 13). The exhaustion of several large size deposits and a lack of new projects on the horizon will increasingly take their toll on zinc production. Indeed, more zinc projects are following the trail of the Brunswick and Perseverance mines in Canada, which ceased operations in 2013 in light of depleted reserves. The Century mine in Australia, Lisheen mine in Ireland and Skorpion mine in Namibia are among a string of zinc mines that are set to be exhausted by 2016.
|Hit By Depleting Reserves|
|Global - Zinc Mine Production & Growth|
|f = BMI forecast. Source: USGS, BMI calculation|
|Bauxite Mine Production, mnt||291||308||324||348||370||386|
|Bauxite Mine Production Volumes, % y-o-y||6.0||5.8||5.3||7.4||6.3||4.3|
|Coal Mine Production, mnt||8,147||8,485||8,820||9,148||9,470||9,755|
|Coal Mine Production Volumes, % y-o-y||3.5||4.2||4.0||3.7||3.5||3.0|
|Copper Mine Production, kt||17,586||18,268||18,936||19,551||20,099||20,568|
|Copper Mine Production Volumes, % y-o-y||5.6||3.9||3.7||3.3||2.8||2.3|
|Gold Mine Production, moz||89.0||91.3||93.5||95.4||97.5||99.9|
|Gold Mine Production Volumes, % y-o-y||3.0||2.6||2.4||2.1||2.2||2.4|
|Iron Ore Mine Production, mnt||2,786||3,044||3,254||3,450||3,602||3,720|
|Iron Ore Mine Production Volumes, % y-o-y||3.3||9.3||6.9||6.0||4.4||3.3|
|Nickel Mine Production, kt||2,223||2,392||2,532||2,659||2,784||2,905|
|Nickel Mine Production Volumes, % y-o-y||6.3||7.6||5.9||5.0||4.7||4.3|
|Lead Mine Production, kt||5,400||5,679||5,931||6,187||6,458||6,726|
|Lead Mine Production Volumes, % y-o-y||4.4||5.2||4.4||4.3||4.4||4.1|
|Platinum Mine Production, moz||6.8||5.9||6.2||6.4||6.5||6.6|
|Platinum Mine Production Volumes, % y-o-y||4.9||-12.3||4.9||2.3||2.3||1.8|
|Tin Mine Production, kt||239||248||258||266||274||280|
|Tin Mine Production Volumes, % y-o-y||-7.6||3.7||3.8||3.2||2.8||2.5|
|Zinc Mine Production, kt||13,500||14,063||14,612||15,116||15,100||14,727|
|Zinc Mine Production Volumes, % y-o-y||0.0||4.2||3.9||3.4||-0.1||-2.5|