Fitch Ratings has raised its metals and mining price assumptions, reflecting increased post-pandemic demand, tight markets and short-term supply disruptions, particularly due to the Russia-Ukraine conflict.
Based on Fitch’s new commodity price assumptions, some commodities will also benefit from increased long-term demand due to their role in global decarbonisation. Following this, “copper is the only commodity where we increased our long-term assumptions due its use in electrification.” Fitch’s new price for copper is US$9,500 from US$8,500 for 2022.
Fitch stated that, “The revised short-term prices reflect very low global stocks, a balanced market and current and potential supply disruptions, particularly due to water stress in Chile and socio-political protests in Peru.”
In addition, proposed new laws in Chile and Peru is expected to introduce higher industry taxes could slow investments in copper mining, and limit supply in the medium and long term. Also, Russia, which accounts for 4% of both mined and refined copper, will be affected in terms of its availability, due to the Ukraine conflict and related sanctions.
Price of iron ore is expected to rise from US$90 to US$110 in 2022. According to Fitch, the increased iron ore price for 2022 reflects healthy demand, boosted by extended Chinese government support to infrastructure, and lower production earlier this year due to heavier-than-usual rains in Brazil.
Russia-Ukraine crisis to Spur Price of Coal
Metallurgical coal price is expected to hit US$300 up from US$160. The revised coal price assumption for 2022 reflects supply risks due to the Russia-Ukraine conflict. Russian supply covers 16 per cent of global and 23% of European demand, and many buyers have reportedly suspended Russian imports, according to Fitch.
Despite the supply constraints within the market, Fitch is upbeat about an easing throughout 2022, and an eventual peak in demand of metallurgical coal by 2023, leading to a reversal in prices.
“We have increased our aluminium price assumptions for 2022-2023 reflecting high-energy prices…” as the new price forecast is now US$2950, up from US$2500. According to Fitch, high energy costs have already led to some production curtailments in Europe, enlarging the forecast global deficit in 2022.
According to Fitch, aluminium price assumptions for 2022-2023 is expected to increase from US$2500 to US$2950, reflecting high energy prices, which pushed up marginal costs of energy-intensive aluminium production. High energy costs have already led to some production curtailments in Europe, enlarging the forecast global deficit in 2022.
Regarding gold price assumptions for 2022, Fitch revised gold price to US$1800 from a previous forecast of US$1600. This reflects “increased demand thanks to gold’s safe heaven investment status amid the Russia-Ukraine conflict and rising inflationary pressures.”
“Long-term price moderation is unchanged as the interest rate hiking cycle continues, ultimately increasing the opportunity cost of holding gold and putting pressure on its price.”
Fitch
Fitch revised nickel price to rise from US$16000 to US$20000 in 2022, attributing the rise to increased supply risks, as Russia accounts for about 7% of total nickel production and 15% of class1 nickel, while demand from battery production remains strong. The coming on-stream of new Indonesian facilities should increase long-term supply, according to Fitch.
READ ALSO: Piedmont Lithium to Sell 1.5 Million Shares to Fund Operations at Ewoyaa and Quebec
