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METALS

Green growth dilemma

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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.)
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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.

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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.

Contacts

 
Allianz Trade Economic Research
research@allianz-trade.com
Ano Kuhanathan
Head of Corporate Research
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