A report by Fitch has pointed to a big jump in prices for Queensland mining commodities in an outlook that will help underpin the state’s recovery.
The benefit appears to be heading towards Mt Isa with the outlook from Fitch showing significant price increases for its major commodities of copper and as the world transitions to clean energy. Aluminium was also likely to benefit because of its use in the automotive industry and in solar panels.
The prospects of the $1.5 billion planned Sconi nickel and cobalt mine in north Queensland would also improve if the Fitch outlook was accurate.
Mining industry group AMMA said government records showed Australia had $334 billion of new major projects in the national investment pipeline.
Chief executive Steve Knott said if all of that could be secured the number of would easily exceed 100,000.
“These projects would also deliver state, territory and federal governments with multiple billions of dollars in revenues, each year for decades on end. Our nation has a very rare opportunity to kick- start its economic recovery with a new wave of investment into one of its most important industries,” Knott said.
The Queensland Resources Council chief executive Ian Macfarlane said the price revisions by Fitch Ratings highlighted the recovery it had been talking about for months.
“The hit to global demand from COVID is short term and the world will continue to demand our materials for economic growth in the long term,” Macfarlane said.
“Recovering steel production in India, Japan, South Korea and Europe is welcome news for Queensland metallurgical coal exports. Metallurgical coal accounts for roughly half of our resources exports ( over $25 billion in the 12 months to Nov 2020) .
“Queensland’s geographic location and coal quality, compared with most global competitors, will support demand for Queensland met coal in the long term.”
Fitch said it had raised nickel price assumptions for 2021 due to strong spot prices and our expectation of increasing demand in 2021 for stainless steel; a key consumer of nickel,” Fitch said.
“We have increased our long-term assumption as we expect the increased use of nickel in batteries to lead to a market deficit from 2025.”
The mining sector has talked for several years about its role in the energy transition with solar and wind farms heavy users of major minerals.
But coking coal, used in steel production, is also looking at improved pricing, even with the bans from China likely to impact the market for the foreseeable future. However, Fitch has forecast an average price for premium hard coking coal at $US135 a tonne, which is a long way short of any record but well above the $US90 a tonne it was receiving last year.
It has also forecast a rising coking coal price in outer years and tipped that delays in mine expansions last year would underpin prices in the medium term.
“We have increased the short-term copper price assumption due to strategic purchases by the China State Reserve Bureau and supply risks in 2021, including renewals of labour contracts in Chile and Peru, which may result in strikes,” Fitch said.
“Medium-term prices will be supported by balanced market and energy transition trends as copper is used in charging infrastructure, cabling, electric vehicles, wind generators and transformers.
“We have increased our zinc price assumptions for 2021 and 2022 due to growing demand in China. Zinc production is price-sensitive and mine supply of concentrates will catch up relatively quickly.
“We have raised our aluminium price assumptions for 2021 on a stronger demand recovery in China, particularly from the automotive and solar energy sectors, and re-stocking outside of China, particularly in Europe. However, we expect a production surplus outside of China to persist, causing prices to soften once pent-up demand is satisfied. Prices will recover longer-term due to incremental demand growth.
Gold was expected to a better the previously expected year with its price expected to settle around $US1400 an ounce but would moderate in outer years $US1200 an ounce.
“The rise in the 2021 coking coal price assumption is due to robust demand from the steel sector, supported by recovering steel production in India, Japan, South Korea and Europe, and rebalanced flows of seaborne coal despite ongoing restrictions on Australian coal imports to China,” Fitch said.
“We expect coal demand to grow in the medium and long term, but final decisions on new projects were delayed in 2020. This means that capacity expansions that were due to take place in 2021-2023 will be delayed until 2024 or 2025. Supply will therefore remain tight, supporting medium- and long-term price assumptions.
Renewable energy would continue to impact thermal coal prices.
“We have lowered the long-term price reflecting China’s ambition to achieve carbon-neutrality by 2060, meaning that carbon emissions, including those from coal consumption, will peak by 2030,” Fitch said.
“Our revision of all iron ore price assumptions is the most significant change and is driven by tight market supply, which we expect to continue in the next couple of years, and the absence of material new projects over a long period that could offset depleting mines.
“(Brazil’s) Vale has cut its production guidance for 2021, resulting in no supply response to growing demand, with all large-scale iron ore producers operating at almost full capacity. Inventories are running low, while we expect additional demand linked to US and European economic stimulus packages.”
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