The current surge in the metals market bodes well for record profits for the mining sector in 2021. Meanwhile, low oil prices will continue to affect producers’ finances. In terms of results, they should be overshadowed by miners.
According to an estimate by Bloomberg, the largest metals producers, BHP, Rio Tinto, Vale, Anglo American and Fortescue Metals, will post a cumulative net profit of $65 billion at the end of the year.
This will be about 13% more than the five majors in the oil sector: Shell, Exxon Mobil, BP, Total and Chevron. This will be the second time in the century that metal producers will outperform oil producers who are burdened by a market that has experienced acute volatility over the past 6 to 7 years.
Between 2008 and 2011, when the barrel was trading around $100 per barrel, the oil majors’ adjusted earnings were at least twice that of the miners.
The dizzying mining profits are mainly due to iron ore, the world’s largest raw material after oil. In February, iron traded at $165 a tonne, up 88% year-on-year. This is on par with the industry’s record prices a decade ago. Demand has indeed exploded driven by China and mainly the post-Covid-19 economic recovery.
Other minerals such as copper are in the midst of a rally towards the highs reaching the $10,000 per tonne mark for the first time in a decade. Aluminium, nickel, copper, tin, lead and zinc are also trading at rarely reached levels. These metals are all part of the production chain of energy solutions more suited to the resolutions of the Paris Agreement in 2015.
Source: Agence Ecofin
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