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Metals Sector Report

Watch The Most Up-to-Date Metals Sector Report Below

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Green rush off to a slow start

SENSITIVE RISK FOR ENTERPRISES

Last Update: July 2024

Strengths & Weaknesses

Strenghts
  • Increasing demand for metals, especially those critical to renewable energy technologies and electric vehicles, which could quadruple by 2040 compared to 2020 in a Net-Zero scenario
  • Despite volatility, many metals still have higher prices than their historical averages, boosting profitability for the sector
  • Government focus on critical materials could increase support for the sector
  • Firms' strong liquidity positions

     

 

Weaknesses
  • High exposure to geopolitical tensions and conflicts
  • Fragmented supply chain at risk of disruptions
  • Mining companies are facing increasing pressure related to ESG (water use, biodiversity, social impacts etc.)
  • High capital intensity
  • Extensive mine lead times  

Sector Overview

What to watch ? 

  • High interest rate environment
  • Green regulation, both an opportunity (through higher demand) and a risk (because of higher regulatory requirements)
  • Public policies on critical materials
  • Policies related to electric vehicles and wind energy
  • Capex in the sector and especially exploration announcements by mining companies
  • Mining lead times
  • Geopolitical developments (war in Ukraine, China-US, Middle East etc.)
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The global base metal market is projected to exceed USD1.1trn by 2030, with the global base mining market expected to reach over USD740bn. Recent growth and expansion in the global metals sector, including mining companies, have been fueled by rising demand in developing economies, the energy transition (from renewable energy to electric mobility) and high metal prices.

In 2023, metal prices remained relatively stable, with base metal prices increasing by +3.6% due to resilient demand, supply constraints in some segments (such as cobalt) and transportation issues. The average EBITDA margin for the metals and mining sector was approximately 13% in 2023, a significant decrease from 2022 but still reflecting strong profitability. Firms in the sector also maintained strong liquidity, with an average current ratio of 1.6 in 2023.

However, the sector faces challenges, including geopolitical tensions, environmental regulations and the need for technological innovation. The ongoing Russia-Ukraine war and high energy and input costs are expected to continue to pressure profitability in 2024. Despite the significant needs for the green transition, many firms have opted to limit their mining development plans. The sector continues to face a growth dilemma as miners need to invest more in exploration to ensure sufficient supply but in the downsteam subsector capital expenditures are set to decrease by about -4% in 2024, while upstream investments should increase by a meagre +4%.

Subsectors

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Steel production: This is a significant segment of the metals sector, with steel being a critical material in construction, automotive and many other industries.
Metal processing and manufacturing: Firms involved in the processing of raw metals into finished products or components used in various industries (other than steel).
Iron-ore mining: Mining of iron ore for steelmaking industries
Base-metal mining: Mining of non-ferrous metals such as aluminum, copper, zinc and lead.
Precious-metals mining: Mining of gold, silver, platinum etc, mostly used for jewelry and as a form of investment.

Watch The Most Up-to-Date Metals Sector Report Below

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Green growth dilemma

S

SENSITIVE RISK for entreprises

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

Updated in June 2023.
  • Increasing demand for metals, especially those critical to renewable-energy technologies and electric vehicles
  • Despite volatility, many metals have high prices, boosting profitability for the sector
  • Governments' focus on critical materials could increase support for the sector
  • Firms' strong liquidity position
  • High exposure to geopolitical tensions and conflicts
  • Fragmented supply chain at risk of disruptions
  • Mining companies are facing increasing pressure related to ESG (water use, biodiversity, social impacts etc.)
  • High capital intensity

What to watch ? 

  • Rising interest rates
  • Green regulation, both an opportunity (through higher demand) and a risk (because of higher regulatory requirements)
  • Public policies on critical materials
  • Exploration announcements by mining companies
  • Geolopolitical developments (war in Ukraine, China-US, Middle East etc.)
useful description of image if informative and not decoration only.

The global base-metal mining market is expected to reach USD744.14bn by 2030. The global metals sector, including mining companies, has been through a recent period of growth and expansion. The sector's profitability has been driven up by increasing demand for metals in developing economies as well as the boost from the energy transition and by higher metal prices. In 2022, metal prices increased by almost +90%, thanks to strong demand and supply constraints. The average EBITDA margin for the global metals sector was 28.7% in 2022, indicating a healthy level of profitability. Firms also have strong liquidity, with the average current ratio standing at 2.1 in 2022.

However, the sector faces challenges such as geopolitical tensions, environmental regulations and the need for technological innovation. The ongoing Russia-Ukraine war and high input costs will continue to pressure profitability in 2023. Indeed, the rise in cost of production has been squeezing margins. Despite the tremendous needs of the green transition, many firms in the sector have decided to limit plans to develop mines. The sector faces a growth dilemma as miners should spend more on exploration to ensure sufficient supply. However, their capex is set to decrease by about -10% in 2023, with exploration likely to fall by twice as much.

useful description of image if informative and not decoration only.
Steel production: This is a significant segment of the metals sector, with steel being a critical material in construction, automotive and many other industries.
Metal processing and manufacturing: Firms involved in the processing of raw metals into finished products or components used in various industries (other than steel).
Iron-ore mining: Mining of iron ore for steelmaking industries
Base-metal mining: Mining of non-ferrous metals such as aluminum, copper, zinc and lead.
Precious-metals mining: Mining of gold, silver, platinum etc, mostly used for jewelry and as a form of investment.

Contacts

Ano Kuhanathan
Head of Corporate Research
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