S&P Global Ratings:
Metals and Mining Industry Top Trends Update

Economics trumps tariffs

What’s changed?
Supply matters.
Supply constraints in iron ore are contributing to sharply higher
earnings for these miners at the expense of steel producers amid weaker steel
demand. A similar margin squeeze is affecting aluminum producers, with high
alumina input costs and low primary aluminum prices.

But so does demand.
Copper prices have dropped again in response to global
growth concerns, not least in China. Our base case assumes continued global
growth in 2019 of 3.4%, with 6.2% in China. For ratings, the financial headroom will
be critical for the next recession or cyclical downturn.

Tariffs are playing a minor role.
Tariffs on steel imports into the EU and U.S.
haven’t prevented a sharp downturn year-to-date in 2019. Concerns about more
tariffs, for example on U.S imports of EU cars, and the “weaponization” of tariffs
beyond specific sectors are crimping growth expectations.

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