Dip in Metal Prices Brings Back Gloom in Mining Sector

Published Date : May 12, 2016

The global mining metals market has been one of the fastest growing markets. However, in the recent years, the market has witnessed slow growth due to economic slowdown across nations. Iron ore, gold, copper, and nickel are the most important investment targets for mining companies as these premium metals play a pivotal role in future projects. It has been observed that mining companies are increasingly exploring the benefits of vertical integration to control the entire value chain of the market. Market players are focusing on every phase of the value chain, right from mining to production. However, to control the value chain, companies mining companies need to control operating costs as well as commodity prices. 

China’s Slowing Economy Deeply Impacts Mining Sector

The global mining metals market is highly dependent on economic growth of nations. Oversupply and low demand for mining metals leads to significant fall in their prices. For example, the economic slowdown in China has led to drastic reduction in the prices of mining metals, especially copper. With China’s economy slowing down, investments in the energy and mining sectors have reduced. Ongoing projects in these sectors have been stalled. As a result, the demand for mining metals has reduced significantly. This has created a negative impact on the overall growth of the global mining metals market. Falling oil prices since 2015 have also hampered the growth of the market. In fact, 2015 had been termed as one of the worst years for the global mining metals market. 

According to industry experts, there has not been a drastic change in the demand for metals this year and hence, investors should not be too positive regarding the upsurge in prices of metals. In China, government had introduced a vast stimulus package to push the growth of the slowing economy. This resulted to increased demand for metals in the country. However, markets are already oversupplied and the Chinese authorities have introduced new restrictions to restrict trading. As a result, metal prices have started to sink since late April.