Fitch Solutions’ latest report highlights the impact of COVID-19 on the metals and mining industry, among others, and the long-term consequences as the global economy moves into recovery mode. Since the start of 2020, the pandemic has led to weaker prices for many metals, operational hurdles, and significant disruptions in supply chains. Fitch Solutions reports that “the pandemic will prompt a rethink of operational strategies, supply chain vulnerabilities, and investment trends” over the coming years as the industry further assesses its strengths and weaknesses and works to future-proof against similar shutdowns.
The report also notes that “COVID-19 will amplify and accelerate many of the commodities sector’s megatrends.” Though they do not see corporate strategies radically changing through the pandemic, Fitch notes that “COVID-19 has added new impetus to the strategic shifts already under way.”
One such trend is the ongoing shift to a low carbon economy, with a focus on sustainability. Economic recovery packages and stimulus plans in the EU in particular are aligning with sustainable development in the commodities sector through climate-friendly policies. The European Green Deal is one such initiative, putting climate at the fore of future development plans. With the aim to make Europe climate neutral by 2050, the European Green Deal covers areas such as clean energy, sustainable industry, sustainable mobility which will have immediate impact on the metals and mining industry. Fitch notes that you can see in Europe’s metals and mining industry already, many players are actively working to reduce their carbon footprint, with an example of “ongoing developments of new lithium extraction techniques in Western Europe and in the growing use of renewable steel production in the EU.”
The global shutdown also understored the rise in international political and social risk, bolstering resource nationalism and protectionist trade policies, all of which further highlight the importance of simplified supply chains. As we saw mines shutdown and movement highly restricted over the first half of 2020, the importance of secure, regional supply chains came to the forefront of many industry discussions. Governments across the globe are now working to ensure domestic supply for crucial minerals and metals, regional manufacturing hubs, and more to help close any future supply chain gaps.