Commodity prices a top risk for 2021: KPMG survey

Commodity prices remain the number one risk in global mining, but environmental, social and corporate governance (ESG) strategy is on the move, according to KPMG’s global mining risk and opportunities survey for 2021.

While a positive outlook remains in the sector, the ongoing global health crisis has caused major uncertainty associated with supply instability and economic downturns.

KPMG’s global mining leader Trevor Hart summed up the rollercoaster that was 2020 and the outlook going forward.

“This survey reveals an optimistic sector confidently dealing with new challenges in 2021. Stakeholder expectations are higher than ever, but as the world recovers from COVID and accelerates to carbon neutrality – so are the opportunities,” Hart said.

“We’ve seen not just a spike in prices for iron ore but more broadly government stimulus and supply interruptions caused by COVID-19 has been driving up prices for commodities.

“Volatility in global markets has also seen investors flock to safe havens, driving strong precious metal prices, such as gold.”

ESG impacts came further into focus this year, jumping to number five as governments applied pressure to remain compliant with new regulations.

Hart said while companies understood the need for ESG accountability, they were yet to understand how the market wanted them to tackle the issue.

“Overwhelmingly, the surveyed mining companies agreed that they now needed to have a clear, measurable ESG strategy. Yet around a third of respondents noted investor expectations are still not well understood or consistent across the market,” Hart said.

Hart also said that while pandemic risk was higher on the list, it was a shorter-term fear compared to ESG management.

“The days of considering ESG factors as soft secondary risks are long gone; recent years have taught the mining that mistakes can carry very hard consequences,” he said.

Despite the risk, the survey outlined some promising signs among global metals prices.

Copper, nickel, iron ore, gold and aluminium prices have all risen in the range of 20-80 per cent since the start of last year.

Hart said if some companies played their cards right, they’d be set up for sustained periods of growth, while some sectors such as coal would face ongoing struggle.

“Organic growth is still a key theme for miners both globally and in Australia,” Hart said.

“Companies continue to focus inward first seeking organic growth, innovation, and productivity gains as their top strategies for growth.

“In addition to boosting domestic consumption, globally, government stimulus measures are being directed into energy transition and infrastructure building projects.”

The 2021 KPMG global mining risks survey conveys the opinions of more than 225 mining executives globally.

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