Strong Global Demand for Commodities Boosts Mining Companies' Stock Prices, Capital Budgets and Project Activity

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The outlook for companies in the Metals & Minerals Industry, mining companies specifically, are much improved compared to their recent lows in early 2016, as rising global demand for various metals, including copper, nickel, gold, silver, zinc and lead, have pushed up commodity prices as well as share prices. This brighter outlook has been reflected in rising capital budgets as well, which means companies supplying equipment and services to mining giants like Rio Tinto plc (NYSE:RIO) (London, England), BHP Billiton plc (NYSE:BBL) (London), Newmont Mining Corporation (NYSE:NEM) (Greenwood Village, Colorado) and Freeport-McMoRan Incorporated (NYSE:FCX) (Phoenix, Arizona) have seen demand for their goods and services increase. Indeed, a rising commodity tide is lifting many, if not all, boats.

"Metals prices are up an average of 25% since the end of 2016," commented Joseph Govreau, Industrial Info's vice president of research for the Global Metals & Minerals Industry. "Economic growth, both in the U.S. and overseas, is pushing up demand for a variety of metals. Project spending for 2018 is expected to be up about 10-15% over 2017, and we expect spending next year to be higher than this year."

Mining companies are spending to develop grassroot projects as well as replacement capacity for mines that are aging and nearing the end of their lives, he continued. Resource purity typically declines with age, and in some cases grassroot mining projects could produce higher yields than continuing to mine existing veins.

The industry's turnaround is evident in the stock prices and capital spending budgets for publicly traded mining companies. Stock prices for Rio Tinto, BHP Biliton, Newmont and Freeport-McMoRan have doubled or even tripled from their early 2016 lows.

This year, Rio Tinto expects to invest about $5.5 billion in capital projects, an increase of about $1 billion over 2017 levels. The company expects to invest $6 billion annually in capital projects in 2019 and 2020. In an April 24 call with investors, Freeport-McMorRan executives said they expected to spend about $2 billion on capital projects this year, a $600 million increase over 2017. Next year, company officials projected spending about $2.3 billion on capital projects.

"As demand grows and commodity prices rise, we see a distinct upswing in project activity," said Govreau. "Globally, Industrial Info is tracking about 6,115 mining projects scheduled to kick off construction in 2018 or 2019, with an aggregate value of approximately $480 billion."

"As is always the case, we don't expect all of the projects that are scheduled to break ground in a given period to actually break ground according to schedule," he continued. "Some projects will be cancelled. Some will be delayed. And some new projects will emerge."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.