A slowdown in the Chinese economy is the biggest risk to the mining and metals sector in 2019, according to a survey of 51 key decision makers.
Law firm White & Case found that 31.4 per cent of respondents believe a Chinese slowdown is the key risk for the industry in a mining and metals-focused report.
The report had trade tensions — which refers primarily to US President Donald Trump’s imposition of restrictive new tariffs on China and several other countries last year — in second place, with 19.6 per cent of respondents.
There is, however, cause for optimism, according to White & Case mining experts Rebecca Campbell and John Tivey.
The report found the impact of these trade sanctions would be more likely to affect price speculation surrounding commodities, rather than reduce demand for the commodities themselves.
“The current cycle should continue to be demand-driven, with miners likely to continue to focus on productivity gains to deliver a measured supply-side response to demand, with less visibility than in previous years,” the report said.
In line with other reports suggesting coal will become Australia’s biggest commodities export in 2018–2019, White & Case suggested that Glencore would reap major rewards through its Yancoal acquisitions in the thermal coal market as companies like Rio Tinto turn away from the commodity.
“[Glencore’s acquisition is] set to see its coal profits jump to US$6.2 billion in 2019, eclipsing its copper earnings this year for the first time since listing in 2011,” the report said.
Over half of respondents (54.6 per cent) also named coal as the commodity most likely to be impacted by China’s ‘Clean Skies’ government policy.
Cost pressure was cited as the biggest driver of innovation in mining among 47.5 per cent of respondents, with Australia’s iron ore miners in particular expected to be the drivers of cost-cutting automation technologies.
The report viewed Rio Tinto’s successful deployment of the AutoHaul autonomous train system in Western Australia and Resolute Mining’s commissioning of the fully autonomous Syama mine in Mali as two examples of Australia’s movement in the automation space.
“More than 40 per cent of our respondents expect cost pressures to be the biggest driver of continued innovation in the sector,” the report said.
“This is likely to gather pace as miners see rivals using automation, live data analytics and integrated supply chains to gain advantages, forcing them to follow suit if they want to hold positions on the cost curve.”
The report also gave some insight into the industry’s continued recovery; shareholder returns were cited by decision makers as the main priority for the mining and metals sector in 2019 (31.4 per cent), closely followed by productivity gains (29.4 per cent).
This represented a large turnaround from the 2017 report, where debt reduction was cited as the main priority.