Commodities: Base metals prices at low level in the coming quarters – ABN Amro

The sharply lower oil price means that energy costs for mining companies are falling. Oversupply is looming and with weaker demand for metals due to the coronavirus crisis, the sector’s problems will only increase, per ABN Amro.

Key quotes

“The sharply lower oil price has led to a significant reduction in operating costs, which reduces the financial stress for many mining companies.”

“Lower operating costs are often an incentive for many mining companies to maintain or even expand production, which will eventually lead to oversupply in many metal markets, and this could translate into relatively low metal prices in the longer term.”

“Economic uncertainty remains high for the time being, which will keep prices of many base metals at a relatively low level in the coming quarters.

“ABN AMRO expects the oil price to reach USD 50 per barrel at the end of 2021, which will continue to challenge the mining sector. It also implies that marginal and unprofitable mines will be able to continue producing for some time to come.”