Several industries have been severely impacted by the COVID-19 pandemic that has affected global economies. The most affected of these are the manufacturing, auto and power industries, who propel the demand for minerals and metals. This could create a tricky situation for mining companies such as Freeport-McMoRan Inc. (NYSE: FCX).
Results of a 2020 poll conducted by Verdict that assessed the worst affected minerals and metals with regards to demand showed that the coal industry experienced a significant decrease in the demand for metallurgical coal, making it one of the most affected industries.
Of the 453 responses collected, a majority voted that the demand for metallurgical coal would be the worst affected in 2020 while 23% of the respondents thought the demand for platinum would be the most affected with 17% who were of the opinion that copper would be the most impacted. The remaining 17% argued that the demand for aluminum and iron ore would be the worst hit in 2020.
Metallurgical coal is used to manufacture high grade coke. The coke is used as a reactant in blast furnace processes in primary steelmaking in addition to being an essential fuel.
GlobalData and IEA Forecast for Minerals and Metals
In the course of the second quarter of 2020, the demand for coal fell as more lockdown measures were imposed globally, which reduced power demand and in turn reduced coal usage. It is estimated by the International Energy Agency (“IEA”) that the demand for coal worldwide will go down by 8%, the biggest drop since World War II.
However, coal production globally is expected to rise marginally at 0.5% in 2020 with its demand remaining steady until 2024, after which it will increase specifically in India and China, as reported by GlobalData.
It is estimated that the consumption of iron ore will decline to 2.8% in 2020 due to vehicle sales plunging. Nonetheless, the forecast shows that once the COVID-19 pandemic is wholly under control, the demand is expected to pick up.
From the forecast, copper is expected to recover firmly even though it will be in surplus for a couple of years. In spite of platinum production not having bounced back completely, its outlook remains positive. The automotive industry increases the demand for these metals.
Additionally, figures from GlobalData project a decrease in the demand for aluminum as a result of a decline in end-user segments. Growth in the weak demand will lead to a surplus increase of 1.3 Megatons of primary aluminum in 2020.
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