Moody's: Global base metals industry outlook stable on sustained improvement in operating environment

The 12 to 18 month outlook for the global base metals industry remains stable, Moody's Investors Service says in a new report. More robust economic expansion in 2017 has contributed to greater base metal consumption and higher prices, improvements that will likely hold in 2018, although a further price rise is unlikely.

"After this year's upward march we expect base metal prices for the most part to trade sideways, with some downward bias," says Carol Cowan, a Moody's Senior Vice President. "Prices will, however, remain comfortably above 2016 levels as this year's recovery stabilizes."

This year's price recovery reflects better fundamentals, supply disruptions in copper, aluminum smelter curtailments in China and improved sentiment on the direction of the base metals industry, adds Cowan. However, Moody's estimates that G-20 GDP growth will remain unchanged at about 3.1% next year, only marginally higher than the 3% needed for a stable industry outlook.

Moody's expects major miners' capital spending in 2017 to rise by 15% to 20%, reflecting increased exploration and development after prolonged underinvestment. The rating agency also anticipates that companies will spend more prudently than they have in the past, while earnings and margins will be constrained by rising freight, energy, and labor costs, and appreciation of other currencies against the US dollar.

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