Covid-19 Executive Briefing

Understanding the economic impact of the Covid-19 pandemic and the implications for the mining sector

- ECONOMIC IMPACT -

Latest update: 18 May

Many economists have cut their GDP forecasts. The 2020 consensus forecast for GDP growth is currently negative and many predict a recession.

Major market indices are improving and, as concern over Covid-19 spreading falls, business optimism is trending upwards.

-1.9%

With economists cutting their forecasts in response to the pandemic, the 2020 consensus forecast for GDP growth is currently -1.9%.

-4.8%

HSBC revised its global economic growth forecast for 2020 to -4.8% in May from -3.3% in April.

Impact of Covid-19 on asset prices

- SECTOR IMPACT: Mining -

Latest update: 18 May

GlobalData analyst view:

"Lockdowns and closure of non-essential businesses and operations is particularly impacting platinum, copper, silver and gold, with only coal mines largely exempt."

The latest forecast for global construction output growth is a decline of 2.2%, versus initial expectations of 3.1% for 2020.

Lower automotive manufacturing will also impact demand for steel, aluminium, platinum, and palladium. Platinum demand is forecast to decline by 7% in 2020.

A slowdown in construction has impacted copper and steel demand, with copper demand forecast to be down by 3% in 2020.

impact on capital expenditure

Rio Tinto advised capex for the full year would be between $5-6bn, down from the previous guidance of $7bn.

Anglo American is cutting its 2020 capex by $1bn to $4-4.5bn.

Glencore is making a reduction from $5.5bn to between $4-4.5bn.

Freeport-McMoRan announced a cut in capex from $2.8bn to $2bn.

Vale announced a reduction from $5bn to $4.6bn as expenditure will be delayed until 2021.