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Fitch Ratings Revises Global Metals and Mining Price Assumptions

Fitch Ratings has revised its global metals and mining price assumptions, increasing short- and medium-term prices for copper, iron ore, coking coal, gold and nickel. We have also increased our 2023 assumption for zinc and the 2025 assumption for aluminium, and cut our 2023 price assumption for Australian thermal coal. We have kept all other price assumptions unchanged.

Our increased copper assumptions for 2023-2025 reflect our expectation of a tight balance in the market. China’s re-opening will support growing short-term demand as China accounts for 55% of global refined copper consumption. Medium- and long-term demand for copper is supported by the energy transition. Still, mine underperformance in Chile, political protests in Peru and recent issues in the smelting sector may constrain copper supply.

We have raised our iron ore price assumptions for 2023-2025 due to the expectation that stronger demand from the steel sector in Europe, North America and other parts of Asia will offset gradually reducing steel production in China. Iron ore supply challenges in Brazil, South Africa and Ukraine support prices in the short and medium term.

The revised metallurgical coal price assumptions are supported by a combination of improving demand prospects after China re-opened and lifted its ban on imports from Australia, increased production costs in the sector – up by almost a quarter in 2022 due to fuel, energy, and labour cost inflation, and the new royalty regime in Queensland, according to CRU – and significant volatility of supply from Australia.

We have kept most of our aluminium price assumptions unchanged, only adjusting the assumption for 2025. CRU expects global aluminium inventories to stay at about 50 days in the coming years, indicating an equilibrium for the market. Meaningful demand growth over the longer term will require new capacity outside China, which will support prices.

Aluminium prices remain exposed to short-term fluctuations as inventories are at relatively comfortable levels. Meanwhile, marginal costs in the sector can change significantly over time due to energy price fluctuations, power shortages in China and exchange rate volatility, particularly due to the strong dollar making aluminium more expensive in local currencies.

Our increased 2023 zinc price assumption is supported by signs of recovering demand from China, while reduced mine production in Peru should lower the surplus in the concentrate market to 100,000 tonnes in 2023 from 420,000 tonnes in 2022, according to CRU. We expect both the concentrate and refined zinc markets to become more balanced in 2023.

We have increased our gold price assumptions for 2023-2025, reflecting the metal’s investment status in light of ongoing geopolitical tensions and economic growth concerns, and price resilience despite interest rate increases.

The unchanged price assumptions for the Chinese thermal coal benchmark reflect a balanced market where incremental growth in coal demand will be covered by increasing supply from four major coal-producing provinces.

The downward revision of our 2023 assumption for the Newcastle thermal coal benchmark reflects weaker demand for coal from Europe as TTF prices declined, with gas replacing coal in the European energy mix. Increased coal exports from Russia to Asian markets and fewer weather-related supply disruptions from Australia could put further pressure on coal prices.

Our increased nickel price assumptions for 2023-2025 reflect structurally higher prices in the market and a rebound in stainless steel production on China’s reopening.
Source: Fitch Ratings

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