How Covid-19 Is Affecting the Mining Sector

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Markets Face Increased Uncertainty as the Virus Spreads

The pandemic is prompting national shutdowns in countries across the globe, and business as we know it has come to an end. Some industries are experiencing somewhat of an upswing, like internet service providers and those that offer essential services such as grocery stores and pharmacies. Others, however, are being crushed. These include passenger airlines, international shipping, hospitality and leisure, consumer durables, and apparel. Industries also taking a serious knock include manufacturing, steel production, technology hardware, services, the chemical sector, and the international mining industry.

Moderate Exposure Anticipated

According to Moody’s Investors Service, the mining sector will continue to be somewhat affected as a result of the pandemic. Although a significantly slowed global economic growth will amplify losses, falling commodity prices may, surprisingly, make a lesser impact. After producers experienced the last slump in commodities in 2015/2016, smaller companies with less diversity experienced great hardships, but higher-rated companies learned valuable lessons and are now generally better able to withstand a downturn in the market. According to Moody’s, the ability of the mining industry to withstand the effects of Covid-19 will largely depend on the size of the mining companies, where they are located, and how long the crisis continues.

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Mining Around the World Right Now

With the current extraordinarily high level of uncertainty, forecasts and assessments are expected to fluctuate over the coming months. Right now, just like countries are responding in different ways to the threat of the coronavirus, mining sectors around the world are being affected in different ways as well. UK mining company Glencore summarily closed its London office after an employee tested positive for the virus. Mexico has ordered all non-essential business activities to cease, and this includes mining.

Despite the fact that several states depend on coal to generate electricity, coal mining operations in the US have been placed on idle. After two employees at Bailey Mine in Pennsylvania contracted Covid-19, holding company Consol Energy limited production for two weeks. Coronado Global Resources idled all its US coal mines because of the economic downturn brought on by the virus. Alliance Resource Partners temporarily stopped producing coal at its Illinois basin mines since the demand for energy has been crushed.

South Africa is bracing for a steep downturn as the country is in a nationwide 21-day lockdown after a surge in Covid-19 cases. Mines have been functioning on a level of care and maintenance, which means that they are kept in a condition that they can successfully reopen, but they are not actually functioning. According to mining analysts, the lockdown will result in a significant loss in output, not to mention incurring major capital expenditure to reopen mining operations.

A Gloomy Outlook

Several mining companies have said that their 2020 outlook will not be clear until the true impact of coronavirus is known. Others are putting on a brave face, like Rio Tinto, which has been quite outspoken about its approach. It has placed the safety of employees first by implementing measures based on geography and advice from local authorities. Unfortunately, no matter how many precautionary measures are put in place, mining companies are not immune to plummeting stock markets.

1 Comment

  1. Why Are Uranium Prices Rising Despite COVID-19? says:

    […] Shortage in Supply – Fears related to Covid-19 have caused widespread closures of mining operations. Countries including Kazakhstan and Namibia […]

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