As the entire mining industry continues to grapple with the impact of Coronavirus, it seems timely to comment on a whitepaper that has recently been released by our partner Roskill,
titled ‚Impact of COVID-19 on the Mining Sector‘. As commodity research experts, Roskill’s specialist insight is hugely valuable to us as we continue our investigations in Norway into EU Critical Raw Materials Vanadium and Phosphorus (as well as Titanium).
A world economy in flux
‚The global economy has experienced its quickest and largest contraction of modern times‘ starts Roskill’s paper. With this in mind, there are pressing questions for both mining companies and their customers alike: How is metals demand being affected, and what will recovery look like? And, what will the medium and longer-term effects on the mining sector be?
Roskill takes the Global Financial Crisis (GFC) of 2008-9 as a historic comparison of another period of economic dislocation. And yet, it states: ‚There is no clear evidence of there being the same degree of fundamental economic imbalances in the major developed economies ahead of the COVID-19 pandemic as there were going into the GFC‘. The huge difference now is that the current economic downturn is largely a result of ’supply shock rather than an unwinding of economic imbalances‘.
Below are Roskill’s predications on economic recovery following the pandemic – including metals demand:
- The initial hit from COVID-19 has been larger, more sudden and more global than the GFC. There are some good grounds though for thinking that the recovery will be equally sharper and with less persistent negative effects on metals demand.
- There are some good grounds though for thinking that the recovery will be equally sharper and with less persistent negative effects on metals demand.
- There is less evidence of prior underlying economic imbalances that will prevent a “V” shaped recovery.
- There appears to be less appetite for governments inflicting a period of austerity after the COVID-19 pandemic is over.
- Mining is even more leveraged to a still resilient Chinese economy, which has already bounced back strongly from the effects of COVID-19.
Vulnerability of supply chains
A theme of Roskill’s analysis that’s of huge relevance to Norge Mining is in regards to supply chains and deglobalisation. It says, ‚The COVID-19 pandemic has accentuated tensions between countries and magnified what were already growing concerns over the vulnerability of the supply chains of many goods and services to disruptions‘. In our opinion, now more than ever, this accentuates the need to be less dependent on trade partners in potentially economically or politically risky areas of the world. It may be the case that a premium is paid in future for greater supply chain reliability. While, as The Economist recently argued, ‚In the age of covid-19 producing closer to home is both an understandable urge and smiled on by many national governments.‘
Vanadium and Phosphorus – both strategically important to the European Union – currently have a high risk associated with their supply. Our investigations so far show the possibility of providing Europe with an unprecedented supply from Norway in the future – a friendly neighbour on its doorstep, essentially. This becomes even more significant, as the trend towards increased traceability and greater ESG requirements of customers of mining products gathers pace.
Overall, Roskill’s expert insight provides an optimistic lookahead at economic recovery and metals demand. It states: ‚As a counterparty to the faster decline in GDP and industrial production, Roskill expects the recovery to be much sharper. In addition, whilst there is general pessimism about the economic outlook, Roskill is still optimistic that demand for most metals will eventually recover back to pre-COVID levels. That recovery will likely be quicker for steel raw materials, demand for which is more China-centric.‘
Norge Mining in Norway
If these predications ring true, as expected, this is excellent news for the mining industry as a whole. While we have further to go on our journey towards producing vital minerals and metals in Norway, we are well on our way – and the results from all our surface and at-depth explorations have already outdone expectations. We went back to carrying out investigative research on the ground in Norway at the end of May – long before many mining companies were able to get back to work. Above all, we believe we are well placed to ride the extraordinary wave COVID-19 has unleashed – and emerge as a strong partner and supplier for Europe for decades to come.