High

Mining & Metals

Commodity price surges are benefitting the sector, however environmental regulatory pressure is likely to increase costs in 2022 and beyond.

Sector trends & challenges

  • Regulatory pressure

    The sector is likely to face increased scrutiny from governmental bodies, customers, environmental groups, and consumers. Further improving environmental and ethical standards will be a continued focus for responsible operators.

  • Global competition

    The metals commodity markets are highly competitive, and less efficient sites with more expensive cost bases may suffer. Respite may come from desire from some customers to shorten some supply chains to improve resilience.

  • Accessing new materials

    There will be exponential demand in the next few years for raw materials used in battery production, such as cobalt, and other new technologies. Obtaining this safely will be challenging, however there is huge upside potential.

Sector rating profile

We have seen the stress level of the sector rise in recent years as global supply and demand becomes more volatile. Strangely enough, the COVID-19 pandemic has actually boosted the sector as inflation and the price of raw materials has increased globally. There are environmental regulatory demands that will need to be met over the coming years, and the cyclical nature of commodities will always mean the sector is exposed to downturns, however the short to medium term looks promising.

Mining & Metals

The metals and mining sector, like every other, has been impacted by the COVID-19 pandemic and the resulting changes in the global economy. Demand for certain raw materials, such as steel, saw a marked reduction as sectors such as construction and automotive fell. However, the sector has witnessed a remarkable recovery as we approach 2022 on the back of a surge in construction activity and increase in commodity prices. Raw material shortages have shifted the supply versus demand balance, and metals and other natural products are selling at a premium right across the sector.

Demand for raw materials in 2022 and 2023 will be directly related to how other sectors of the economy continue their recovery. The withdrawal of furlough in September 2021 and the introduction of increased taxes, in the form of NI contributions and the freezing of tax bands, could have an adverse impact on the UK economy for example. There is a growing desire to improve supply chain resilience, which may support European plants over those located further afield, especially if shipping costs remain high.

The pivot towards renewable technologies and the wider environmental agenda is likely to have an immediate and lasting effect on the sector. The impact both raw material extraction and metal production processes have on the environment is likely to come under ever-greater scrutiny, with less efficient operations and plants likely to become unviable. The growing demand for advanced batteries and technology products, is going to require new sources of hard-to-acquire raw materials such as cobalt. Extracting these vital new materials in an environmentally and ethically responsible way will be critical.

Find Your Expert

James Fagan is Interpath Lead for the ENR sector, which includes Mining & Metals as one of four core segments. For a full list of our senior people with experience in the Mining & Metals sector use the button below.

Our senior team