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China slowdown may impact metals markets, but next 2 years seen strong: panel


Urbanization growth seen shifting to developing nations

Inflation, weaker dollar to uphold near-term metals prices

London — An expected slow-down in China's economic growth rate may impact metals markets over the next decade, although the next two years look set for strong minerals commodities performance, analysts told a Brazil-organized mine industries conference this week.

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Economic growth rates are likely to slow in key global metals and mining markets including China over the next 10 years as demographic and urbanization growth shifts to emerging nations, said Barbara Mattos, Sao Paulo-based senior vice president, Moody's Investors Service.

This could impact metals demand in some domestic markets as a close relationship exists between economic growth and metals demand, the analyst said.

"Continuing urbanization will support [metals] demand particularly in developing Asia and Latin America between 2020 and 2030, but there will be lower growth rates in the developed parts of Asia and in China," Mattos told a webinar organized by Brazilian Mining Institute Ibram. "This is important because China consumes around 50% of the world's base metals and 70% in the case of iron ore and other metals."

Metals prices have been held up this year by the fact that China is probably the only large nation that has not registered a fall in industrial production in 2020, according to the analyst.

More mature markets are likely to stabilize while emerging markets such as India will see faster consumption growth and faster growth in industrial production moving forward, the analyst said.

The impact of the COVID-19 pandemic is expected to pull down global growth by 4% in 2020 before a recovery of 5-6% in 2021, she said.

One new trend over the next decade will be the growing demand for metals for electric vehicles, which should benefit copper, nickel, aluminum, lithium and cobalt markets, where "supply will be challenged to meet demand", she said.

Weaker dollar to uphold metals prices

Thiago Ojea, Goldman Sachs' vice-president Latin America, base metals research, said he foresees government spending in efforts to speed economic recovery from the COVID-19 pandemic will boost inflationary pressures worldwide in 2021.

Continuing expansionist policies in the US, coupled with inflationary pressures, should push the value of the US dollar down in the coming years which may support dollar-denominated mineral prices, supporting a strong commodities markets over the next two years, he said.

Ojea sees iron ore remaining firm at average prices of $90/mt in 2021, with copper, on which he is "superbullish", expected to remain around $7,300/mt next year, viewed as a sustainable level due to economic recovery, the impact of green policies expected to be adopted by the incoming Biden administration in the US, and also due to recent production falls in Latin America, where political instability and ESG factors could continue to impact new mine investment decisions in some countries.

Gold could meanwhile reach $2,300/oz in its continuing role as investor safe haven, Ojea said.