The second quarter of the year has been rough on the mining industry. With production costs on the rise and the global economy faltering in recent months, fortunes have dimmed substantially in the mining sector in recent months.
Global mining activity has slowed down since June, and according to analysts from S&P Global Market Intelligence, lower metal prices and an increasingly negative global economic outlook are to blame.
Senior analyst Sean DeCoff said in a quarterly report, titled “State of the Market; Mining Q2,” that the valuations of metals and the companies that mine them have been impacted by worsening economic conditions around the globe as well as low metal prices. This is despite the fact that metal and mining stocks outperformed the S&P 500 through the three months since June.
Speaking during a webcast, S&P Global Commodity Insights’ research director Mark Ferguson stated that certain indices faired much poorer in the first half of the year; he attributed this to an increase in market volatility in the macroeconomic outlook. In fact, the past couple of months were so rough on the metals and mining industry that the S&P 500 saw the worst first half in half a century, he noted.
Ferguson added that reduced metal prices during the first half of the year resulted in limited capital support in the mining industry as well in the first half of 2022. He added that the ASX Metals and Minings and the TSX Global Mining indexes weathered the past few months better, achieving high prices and maintaining them well into April. However, Ferguson observes that those indices have also begun to struggle alongside the rest of the mining market.
The June quarter saw especially depressed equity market support for the mining industry, Ferguson stated, arguing that the drop in metal prices further weakened capital support for the industry.
S&P Global tracks and compiles the aggregate market caps of nearly 2,800 public listed companies worldwide, the analysts noted. And when they reviewed the data from this group of companies, they found that June saw especially low equity market support levels. Although the analysts noted that equity support levels hadn’t fallen off the cliff, they acknowledged that the levels were still down compared to last year and the second half of 2020.
In addition to this, Ferguson pointed out gold as a standout, observing that it held sway through the period while other metal prices were impacted by geopolitical factors. The solid performance of gold during this turbulent period boosted the balance sheets of giant mining companies such as Freeport-McMoRan Inc. (NYSE: FCX).
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