Mining’s great comedown: WoodMac forecasts 2022

In 2022, the mining industry will see relaxed commodity prices, action on net-zero plans and the continued struggle of rising labour costs, according to Wood Mackenzie.

The global resources research business outlined several key themes to expect over the coming year, including supply, decarbonisation and costs.

After iron ore, coal, copper, nickel and lithium all reached record price highs in the past 12 months, Wood Mackenzie vice chair Julian Kettle described the balance foreshadowed for 2022.

“The most likely outcome is an environment where commodity prices can settle from the extraordinary highs of 2021,” Kettle said.

“But there are plenty of risks to this outlook. The pandemic’s tendrils continue to ensnare markets for all mined commodities.”

Themes of supply constraints are expected to continue in 2022, according to Wood Mackenzie, but a lower year of demand growth should see this untangle thereafter.

Wood Mackenzie vice president Robin Griffin said they were interested to see how miners managed the windfalls of COVID-19 years.

“Supply will improve, but we do not expect a meaningful investment spike this year. An obvious question is where will the record earnings of 2021 be directed?” Griffin asked.

One answer to this was action on previously announced net-zero plans, following the United Nations COP26 conference in Glasgow, Scotland, during 2021.

Companies such as Newmont and Caterpillar, Rio Tinto, Orica and Alpha HPA, and Fortescue Metals Group all made significant ‘green’ announcements last year, amid a media storm of like-minded companies.

But Kettle acknowledged that very little decarbonisation will be accomplished by the mining sector unless it is financially viable.

“Miners and consumers will understandably focus on decarbonisation options that make the most economic sense,” Kettle said.

“So, expect a plethora of new renewable PPAs (power purchase agreements), and captive solar and storage plans this year at production sites.

“Mine haulage will get plenty of attention too with Komatsu’s 930E hydrogen fuel-cell haul truck trial at Anglo’s Mogalakwena platinum mine worth watching. But also look for more traction on battery, gas, bio and green-diesel haulage options.”

Current struggles with labour costs are expected by Wood Mackenzie to continue throughout 2022, as lockdowns, illness and isolation all play their part in worker absenteeism.

Supply issues are also expected to affect the price of fuel and electricity, leading to a decline in profits to near pre-pandemic levels for most commodities.

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