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||153.86||146.58||152.90||159.67||167.28||171.21|
|Mining Industry Value, USDbn, % y-o-y||-17.68||-4.73||4.31||4.43||4.77||2.35|
Latest Developments & Structural Trends
Although Russia's mining sector holds significant production growth potential - due to its rich mineral deposits, including coal, iron ore, gold and platinum - the country's bureaucratic hurdles, Western sanctions and weak mineral prices will limit new projects from coming online and weaken mining output growth over the coming quarters.
Coal: 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 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.
Gold: Russia will remain the world's third largest gold producer, with significant potential to expand output and increase the country's share of global gold production. We expect Russia to account for 9.6% of global gold production in 2016. 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.
Iron Ore: 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. Russia holds more than 25bnt 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 grow from 110mnt in 2016 to 123mnt in 2020, averaging annual growth of 2.7% during 2016-2020, showcasing consistent growth following 2.7% y-o-y during 2010-2014.
Due to our downbeat view on global iron ore prices, we expect mining investment to come under pressure in the coming years. We forecast iron ore prices to average USD41/tonne during 2016-2020, significantly lower than the average price of USD137/tonne during 2010-2014.
Nickel: We have revised down our forecast for Russia's nickel mine production due to Norilsk Nickel's (Norilsk) 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 1.6% to 0.5%, 1.5% to 1.0% and 1.4% to 1.0% for 2016, 2017 and 2018, respectively. We now forecast output to grow from 253 thousand tonnes (kt) in 2016 to 265kt in 2020. This would represent an average annual output growth of 1.0% during 2016-2020.
Palladium: We have revised down our palladium production forecast from 1.2% to -3.4% and 1.2% to 0% and 1.6% to 0.5% for 2015, 2016 and 2017, respectively. Besides low palladium prices, the Russian government will continue to have an influential role in dictating the amount of palladium supply exiting the country, thus restricting the sector's growth prospects. Moreover, the country's high barriers to entry and restrictive regulation will discourage foreign miners from entering the mining sector.
Platinum: We have revised down our platinum production forecast from 1.1% to 0% and from 1.2% to 0.5% for 2015 and 2016, respectively. The country's platinum output growth will slow 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.