BMI View: Russia's g old and coal production growth will be the sector's relative bright spots , while P GM's and iron ore output growth will grind to a halt . Low metal prices , the country's inadequate infrastructure and Western sanctions will continue to limit the sector's production growth.
|e/f = BMI estimate/forecast. Source: National sources, BMI|
|Mining Industry Value, USDbn||153.90||140.20||145.90||153.40||160.70||167.40|
|Mining Industry Value, USDbn, % y-o-y||-17.68||-8.87||4.08||5.10||4.80||4.17|
Latest Developments & Structural Trends
With 157bn tonnes (bnt) of coal deposits, Russia's holds the second largest recoverable coal reserves in the world. We expect Russia's coal production to grow from 392mn tonnes (mnt) in 2015 to 427mnt in 2019, as production ramps up in the country's Kuznets basin. This would represent an average annual production growth of 2.3% during 2016-2020, significantly lower than the average 6.4% during 2010-2014.
We forecast Russia's gold output to grow from 8.0 million ounces (moz) in 2016 to 8.4moz in 2020. This would represent an average annual growth of 1.5% during 2016-2020, significantly slower than 5.3% during 2011-2015.
We have revised up our iron ore forecasts to 2020. We expect iron ore prices to average USD48.0/tonne during 2016 and USD43.0/tonne in 2017, up from our previous forecasts of USD38.0/tonne and USD40.0/tonne, respectively. Our upwards revision is predicated on the strong H116 iron ore price rally due to increasing demand from Chinese steel mills ( see: ' Iron Ore: Chinese Stimulus Only Short-Term Boost To Prices', May 5).
We've revised down Russia's 2016 output forecast from 2.3% to -0.5% for 2016 due to weaker than expected output from Russian iron ore producer Mettaloinvest. Despite this, Russia's iron ore production growth will be supported by the country's vast iron ore reserves and Metalloinvest's strategy to increase output through innovation at the firm's existing mines over our forecast period to 2020. Russia holds more than 25bn tonnes of iron ore reserves, making it the third largest holder of reserves, after Australia and Brazil, respectively. We forecast Russia's iron ore production to row from 107mn tonnes (mnt) in 2016 to 117mnt in 2020, averaging annual growth of 1.8% during 2016-2020, showcasing consistent growth following 2.4% y-o-y during 2011-2015.
We maintain our nickel price forecasts for the coming years as our outlook on global supply trends remain unchanged, including our view that the partial relaxation of Indonesia's ore export ban and Indonesian nickel pig iron smelters coming online by 2017 will prevent a supply-crunch in the refined nickel market. We forecast an average of USD9,000/tonne and USD10,500/tonne in 2016 and 2017, edging up to USD11,500/tonne by 2020. Global nickel price weakness will continue to limit the sector's growth outlook over the coming years. In 2014-2015, nickel price weakness resulted in a significant number of capacity closures.
We expect Russia's nickel mine production to be subdued due to Norilsk Nickel (Norilsk)'s reduction of low-margin tolling operations at Kola MMC and the divestment of Tati Nickel in April 2015. We revised down our growth forecast from 0.5% to -4.5%, for 2016 as a result. We now forecast output to grow from 241 thousand tonnes (kt) in 2016 to 252kt in 2020. This would represent an average annual output growth of 0.1% during 2016-2020.
We forecast palladium output to grow from 2.82moz in 2016 to 2.93moz in 2020. This would represent an average annual output growth of 0.7% during 2016-2020.
The country's platinum output growth will contract and average an annual 0.5% decline during 2016-2020, due to both declining ore grades and a lack of new projects coming online over the coming years. We forecast the country's annual output growth to contract slightly during 2016-2020. We expect Russia's platinum production to decrease from 0.81moz in 2016 to 0.79moz by 2020.
The Russia 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 Russia 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 Russia.
- Use BMI's independent industry forecasts on Russia to test other views - a key input for successful budgeting and planning in this mining market.
- Target business opportunities and risks in Russia's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in Russia.
- 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.