6th February 2018
Olivier Aeschlimann, Senior Financial Analyst and Fund Manager
The mining and metal sector benefits currently from very favourable conditions, which, in our view, are not fully accounted for by the markets:
1) Growth of worldwide demand;
2) Better discipline of producers;
3) Weaker US Dollar.
Firstly, the global economic recovery should translate in a strong growth of demand for steel. ArcelorMittal estimates this to be about 2% globally, 3.5% outside China. Secondly, the Middle Kingdom has made huge efforts to improve the quality of air and to reduce its carbon emissions. This translates to sharp cuts in steel and aluminium production. As a result, China does not any longer export its oversupply at dumping prices, which has allowed western and Japanese producers to regain their pricing power and to improve their margins. Finally, the weaker US Dollars improves the financial conditions of the emerging countries, which have their debt in this currency and hence see their growth stimulated. All these factures lead us to be optimistic for the mining and metal sector in 2018.