Metals & Mining: Shifting gears
Aaron Fleming
Co-Head of Energy Transition & Natural Resources, Asia Pacific
Natixis CIB
2024 promises a shifting gears moment for metals and mining. While demand rises on China's stimulus and global recovery, uncertainties like potential recessions and geopolitical tensions cast shadows. So how can producers and consumers strategically navigate this, not just considering demand shifts, but also potential M&A plays and the tricky terrain of capital access?
Producers:
- M&A: Consolidate for resilience: Mergers with complementary assets or geographically diverse operations can create a stronger, more diversified business. Producer will be targeting critical minerals, prioritizing lithium, nickel, copper, and other metals that are crucial for the energy transition.
- Capital: Secure funding early: Locking in loans or equity investments before potential credit tightening in second half of 2024 will be key. Producers will prioritize green initiatives, investing in renewable energy projects or electrification of mining operations to attract environmentally conscious investors.
Consumers:
- M&A: Vertical integration: Consumers will consider acquiring or investing in mining or processing companies to improve control over the supply chain and mitigate price volatility. Partnerships are likely to dominate, with collaboration between consumers and up-stream producers to secure resources, and mid / downstream players to gain access to innovative processing technologies.
- Capital: Inventory management: Companies will want to reduce stockpiles to free up capital for other investments, and deploy hedging strategies, using derivatives to protect against price fluctuations in key metals.
The Capital Conundrum: Expect a tighter environment for raising capital. Banks may prioritize established players with strong creditworthiness. Producers should demonstrate operational efficiency and commitment to sustainability to attract investors. Consumers should focus on cost-cutting initiatives, ESG best practice and innovative solutions to secure funding.
Agility is key. Stay informed, adapt quickly, and leverage data to make informed decisions. By strategically positioning around M&A and capital, both producers and consumers can navigate the shifting gears of 2024's metals and mining landscape and emerge stronger.
