Coronavirus could be a threat to the mining industry

Due to the outbeark of Coronavirus, China have to stopped it’s Economy to tackle Coronavirus. Now the World Suffers.

The virtual shutdown of one of the world’s biggest economies since last months is hurting business around the globe, from multinational companies to street vendor and tour guides. also, as well as the mining industry.

Nowaday, thanks to the Economic Globalization. A lot of things work in connection: supply chains, shipping, transport, movement of goods. There is no one standing over it telling it which component goes where. If the coronavirus plunges the world into recession, China will be the biggest reason. Economists caution that its shutdown threatens the economies of Japan, South Korea, Europe and even the United States. Huge corporations like Apple, Microsoft, and Pfizer have already seen an impact.

China has become a voracious consumer of the world’s rocks, oil, food and other raw materials. Before President Trump launched a trade war against China, it bought more than one-quarter of America’s soybeans. Australia’s mining industry, which employs more than 200,000 people, depends on China.

In Mongolia, coal mining for China makes up nearly half of its export revenue and provides jobs for people like Battogtokh Uurtsaikh, who is wondering what to do next. Australian miner Rio Tinto recently is reportedly facing a slowdown in copper concentrate shipments from its Mongolian mine as efforts to contain the coronavirus outbreak is affecting the company’s product flows to China. Rio Tinto ships copper to China from its Oyu Tolgoi copper and gold mine in Mongolia.

Reuters reported that the Australian miner is experiencing issues with the copper ore deliveries with the transport restrictions imposed by China to stop the spread of 2019-nCoV (now Covid-19) outbreak. The news agency reported Mongolia would stop deliveries of coal across its border into China until 2 March. While China’s Yunnan Copper receives almost 10,000t a month of copper concentrate for its Chifeng smelter from Oyu Tolgoi. and as a result of that, a unnamed source cited by Reuters saying that the Chinese firm has reduced copper output at the 400,000tpa Chifeng plant by around 30%.

“Rio Tinto confirms there has been a slowdown in copper concentrate imports crossing the Mongolia-China border related to coronavirus containment efforts by local authorities.”

Quoted by Rio Tinto spokesman.

And it’s reported that Zinc prices also decline due to concerns over impact of Covid-19 in China.

Zinc prices have fallen to their lowest levels since June 2016 due to increasing concerns over the economic impact of the coronavirus outbreak, now known as Covid-19, in China, the world’s top consumer of metals. The decline in prices comes amid growing worries over the economic impact of the Covid-19 outbreak in China, as well as fears over its spread into other nations which may reduce demand outlook for the metal.

As of 1st Mar 2020, the number of deaths related to Covid-19 has increased to more than 3,000 in worldwide. And more than 91,000 of affected cases according to worldmeter.

Following reports of Covid-19 outbreak in China, the complete pack of base metals is said to have come under pressure, of which zinc noted the biggest fall.

Zinc prices have proven turbulent in stock exchanges since the disease outbreak. At London Metal Exchange (LME), zinc stocks rebounded more than 50% from a near two-decade low of 49,625t hit earlier this month. Meanwhile, stocks at Shanghai Futures Exchange (SHFE) this year have jumped more than 400% and at 143,164t as of 21 February.

Reuters reported that zinc stocks in LME-certified warehouses hit their lowest in nearly three decades last week.

Last month, major metals and mining firms witnessed share price drops due to uncertainty around the Covid-19 outbreak.

Global firms such as Rio Tinto, Rusal, Vale and Glencore saw share price reductions of between 3% and 4% due to the Covid-19 outbreak, The Economic Times reported.

So, will this make a huge impact to the mining industry?

Properly not, because the larger mining companies are currently in a positive free cash flow position after having tackled cost inflation in the industry over 2013-2018, they are well positioned to control their own destiny – and can choose how to best deploy their cash, whether through share buybacks, M&A or other investment.

However, there is a risk that over the longer term, investors who are looking for “cleaner,” low-carbon investments may start to write off the mining industry entirely.

“That’s not a challenge for us today because we’re in a positive free cash flow territory and there’s not a lot of debt being raised,” he said. “But if we don’t start to address that challenge now and why that thinking is wrong – if you don’t invest in base metals mining now, there isn’t going to be the metals and minerals to actually have that less carbonized world – when we need the money it’s not going to be there.”

Paul Robinson, a director at CRU Group, recently noted in the unusually sparse attendance.

 

 

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