BMI View: Peru's mining industry will be a regional growth outperformer, supported by a strong copper project pipeline, low operating costs and a favourable business environment over the coming years .
|f = BMI forecast. Source: National Sources, BMI|
|Mining Industry Value, USDbn||21.30||20.90||22.30||24.90||27.10||29.10||31.30|
|Mining Industry Value, USDbn, % y-o-y||-9.10||-1.60||6.60||11.80||8.80||7.50||7.50|
Latest Updates & Structural Trends
Peru's extractive industry will experience significant growth over our forecast period to 2020. We expect the sector's value to climb from USD22.3bn in 2016 to USD31.3bn by 2020, averaging 8.4% annual growth. In particular, we expect copper to outperform in terms of production growth due to a strong project pipeline and continued investment. Silver and gold will also benefit from a number of key projects and improving precious metals prices, while tin and zinc output posts slower growth. The country will remain a top global producer of each of these minerals.
Peru's copper production continues to outpace expectations, prompting another increase to our growth forecast. We now expect the country's copper production to increase by 38.0% to 2.2 million tonnes (mnt) in 2016, from the previous forecast of 18.0% growth. Projects including MMG's Las Bambas, Freeport McMoRan's Cerro Verde expansion, and Hudbay Minerals' ramp up at the Constancia mine will continue to drive growth over the next few quarters, helping Peru overtake China as the world's second largest copper producer by the end of the year.
We forecast Peru's gold and silver sectors to post solid production growth, averaging 3.6% and 3.1%, respectively, over our forecast period to 2020 on the back of improving precious metal prices. In H116, Hochschild Mining's Inmaculada mine drove Peru's gold production, ramping up to 79.2 thousand ounces (koz) from 3.4koz in H115.
Ongoing metal price weakness, anti-mining protests, and illegal mining will remain key challenges to Peru's mining industry. While these factors may result in project delays, Peru's low operating costs, supportive political environment and significant project pipeline will offset any production declines.
President Pedro Pablo Kuczynski will support policy continuity and push an agenda that aims to boost investment in the mining-driven economy ( see 'Kuczynski Will Solidify Peru's Business-Friendly Reputation', July 28). In July, Kuczynski proposed relaxing regulations on air quality to encourage investment in copper smelting.
The Peru Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.
BMI's Peru Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in Peru.
- Use BMI's independent industry forecasts on Peru to test other views - a key input for successful budgeting and planning in this mining market.
- Target business opportunities and risks in Peru's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in Peru.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity), Key Projects Tables and Competitive Landscape Tables.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.
Industry SWOT analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
- Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
- Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
- Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.
BMI’s Mining Risk Reward Index
BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Competitive Landscape Tables & Analysis
Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.