Miners continue to rein in spending intentions, according to a survey of miners by Citi Research.
Citi, which assesses spending intentions of miners quarterly, said that for the next year capital expenditure expectations have weakened slightly.
Responses to its survey suggest a drop in equipment spending of 1.5% in the next year. In its previous survey, the expected drop was 0.8% suggesting increasing pessimism about investment into operations.
“This marks the second consecutive quarter when we have seen a step-down in expectations since the fourth quarter of 2014 when we saw momentum building (+3% vs -0.8% in 3Q14; -7% in 2Q14 and -3% in 1Q14),” Citi analysts write.
Likewise Citi suggests miners are pushing out major spending intentions. Miners had previously signalled in Citi surveys that they planned big investments in 2017.
In the last report Citi notes that 55% had intended to make significant investments in 2017. But that now drops to “only 15%”.
Instead, big spending intentions have been pushed out to 2018. Citi says 62% of respondents said they would start making significant investments in 2018, up from 18% in the last report.
Notably, “This is the fourth consecutive time when spending intentions have been pushed to the right by 12 months,” Citi says.
In metals and minerals, Citi says the survey results suggest the outlook for diamonds has picked up, but worsened for iron ore. Meantime, coal and platinum fell into the negative category whereas gold, base metals, and copper were viewed as having positive prospects.
Still, there was some strength in the spending intentions. Citi noted most respondents signalled “greater than average” spending on mining tools.
In terms of stocks that could see growth, Citi highlighted Atlas Copco. The survey results suggest “strong production volumes underground, in our view” and that means “relatively better demand for Mining Tools and Drilling Equipment” which it considers “a positive for buy-rated Atlas Copco”.
Citi, overall, forecasts a decline of 15% in capex spending to 2017, mostly accounted for by cut backs on infrastructure.