A mid-year survey that analysed the post COVID-19 global mining and metals market has found the fear of a global recession is the most common concern across the industry.
The survey, which was released by international law firm White & Case, spoke to 67 senior mining and metals decision makers to gauge their thoughts on what was to be expected for the remainder of the year.
It found that the most common key risk for the industry was global market weakness (39 per cent), compared to trade tensions being identified as the largest risk in the survey conducted in January (26 per cent).
According to White & Case, fears over trade tensions between the United States and China were expected to drag on throughout the year in the January survey, but this has changed since the arrival of the COVID-19 pandemic, with the risk of trade tensions now sitting at five per cent.
With COVID-19 stalling many major mining operations across the globe with temporary closures and reduced workforces, over a quarter (27 per cent) of respondents said building resilience would be the main priority of the mining sector post COVID-19, followed by productivity gains (18 per cent) and efficiencies (18 per cent).
A total of 37 per cent of respondents believed the mining industry would boost its resilience through “supply chain excellence, followed by 22 per cent saying environmental, social and corporate governance will build resilience.
But considering commodity demand from China has remained steady, only 13 per cent of respondents believed generalist investors might become wary compared to 36 per cent at the beginning of the year.
The survey also found that copper (39 per cent) and gold (33 per cent) could be the commodities to recovery the fastest post COVID-19.
“After a dramatic slump in the first three months of the year when the copper price fell by almost 30 percent, the bounce back has been almost as swift with China’s copper smelters ramping up output in April and May as economic activity recovered,” White & Case said in the report.
Half of the respondents believed resource nationalism posed the biggest risk in Africa.
For resource nationalism, 75 per cent of respondents anticipated a government enforcement increase, with 40 per cent expecting Africa to see the largest amount.
“Such is the importance of mining to many African countries—with fewer levers to pull during a global recession—they simply cannot afford to lose a core revenue stream at a time of macro uncertainty, which may tempt them towards more nationalistic behaviour,” White & Case said.
While precious metals have been a standout in 2020 performance, mergers and acquisition activity is expected to rise.
Almost half (49 per cent) of respondents believed precious metals would be the key risk for the mining sector’s third and fourth 2020, with respondents expecting more mergers and acquisition activity in this area.
This was followed by a quarter believing battery materials (25 per cent) would pose a key risk.
“The specter of further waves of infections is undoubtedly the elephant in the room regarding coronavirus,” White & Case said.
“This is the most significant factor that will determine whether this apparently swift recovery can be sustained.
“If so, the mining and metals sector should benefit, having proven itself to be resilient with markedly improved balance sheets following the downturn that engulfed the industry since 2015.”