US-based rating agency Fitch Solutions has issued a statement regarding the extent of the impact of the coronavirus on the steel and mining industries in 2020, while also forecasting a recovery for 2021. Fitch Solutions stated that in 2021 economic activity will pick up in a broader and deeper fashion than in the second half of 2020, while the extent of the recovery will diverge for different sectors.
Fitch Solutions said it expects miners and steel producers to see a more favorable pricing environment in 2021 as it forecasts almost all mineral and steel prices (except iron ore) to average at higher levels in 2021 on year-on-year basis. Although steel prices made an impressive recovery over the second and fourth quarters of 2020, following the drop recorded at the beginning of given year due to the coronavirus, Fitch Solutions noted that prices will still average lower on year-on-year basis in 2020. In 2021, prices will be supported by the broader and deeper global economic recovery as Covid-19 vaccines are made available.
According to the statement, mining and steel operations will improve in 2021 since access to vaccines will reduce operation disruptions, after the sector saw significant disruptions in 2020 due to government-imposed lockdown measures. The pickup in supply will affect prices.
Fitch Solutions forecasts a sharp recovery in global demand for minerals and steel in 2021. China’s steel consumption will remain strong as infrastructure projects continue. Other regions such as the US, the EU, Japan and India, that saw their mining and steel operations disrupted and impacted by lower end-demand, will see a sharper recovery in production.
As overall prices, production and consumption of minerals and steel will improve in 2021, the outlook for miners and steel producers is positive for the year. The decline in input prices that the agency forecasts for the steel industry, due to improved supply, will help profitability to pick up in the sector in 2021. Fitch Solutions forecasts that mining and steel capital expenditure will improve in 2021, compared to 2020. The spending outlook for 2021 has consequently improved due to companies postponing growth projects from 2020 to 2021.