The past few months have been of major importance for the metals industry and mining industry, with the field dealing with drastically lower prices in the beginning of the COVID-19 pandemic, only to see many commodities reach multiyear highs quite recently.
This article examines the potential impact of the COVID-19 crisis on the future demand for metals as well as some market trends which can potentially impact the market and its recovery.
Trends in metals & Covid-19
There are three main trends which will be popular throughout 2021. Let’s get into them.
- Demand for commodities
With vaccination campaigns going on, recovering economic activity is increasing the demand for many commodities, which will make miners face the challenge of meeting supply needs. In fact, iron ore and copper prices have been specifically favoured from the improving outlooks, supported by government efforts around the globe. Moreover, a sudden increase in electric vehicle interest is also forcing supply chains for the three major battery metals: nickel, lithium and cobalt.
- Rise of Environment, Social, and Governance (ESG) minded companies
There is a main question in the field of metals that remains on the table: How will the transition of energy, and investor interest in more ESG-minded companies, connect with the mining industry? S&P Global Market Intelligence discovered that sales from electric vehicles in Germany, France, the U.K. and Norway were increasing every month. However, the world’s biggest EV market in China has estimated electric vehicles to reach 2.2 million units in 2021, jumping over 5 million by 2025. Although the EV revolution is increasing demand for battery metals, the need for renewable energy sources will also favour copper and iron ore producers. Simultaneously, miners are pushed by investors and governments to reduce emissions and be more environmentally friendly, aware and responsible. Addressing these ESG concerns and facing the rising demand will require continuous transparency and flexibility.
- Stronger gold price
The recession caused by the pandemic pushed gold to new highs, with prices climbing over $2,000 per ounce in August 2020. However, the market has recovered. Supported by the higher prices, investing in junior and intermediate companies has been significant since the mid-2020s, with the amount raised in the first three months, marking a nine-year high. Mergers and Acquisitions (M&A) activity was also important in the end of 2020 and is expected to continue throughout 2021 as many leading companies claim that consolidation seems possible.
Trends in metals & Covid-19
All in all, the near-term outlook for the mining industry remains strong, while gold prices are expected to remain high. In the future, the metal sector will capitalise on raw material needs which are vital to the global energy transition efforts.
The COVID-19 pandemic has influenced the commodity markets in multiple ways. Company activities have been impacted from the outbreak and government shutdowns. Demand for various commodities has remained low and might continue to be so in the near term.. Metals manufacturers may also experience a decline in demand, production and revenues as the COVID-19 pandemic worsens. Manufacturers of metals for industrial use, such as copper, may experience a decline in demand as well, as their users, such as the automotive sector face their own declining demand from consumers.
Disclaimer:
This information is not considered as investment advice or an investment re commendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.
