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Mining Production to Recover Somewhat in Second Half of This Year, Says Fitch Solutions



By Donna Slater

May 4, 2020 - Industry analysis company Fitch Solutions Country Risk and Industry Research (Fitch) expects a relatively quick ramp up in mining operations across the world when Covid-19 lockdowns and other restrictions are lifted or relaxed.

The impact of Covid-19 on mining production will be primarily felt in the first half of the year, with production recovering in the second half as virus containment measures impacting the mining sector are relaxed, it says.

The majority of mine and associated facility closures started in the first quarter of the year and have continued into April.

The production curtailments primarily began as governments instituted lockdown measures, which forced mines to reduce operations to care and maintenance. In other cases, the pandemic's negative impact on commodity prices has forced some miners to take drastic action by shutting mines as a result of deteriorating economics of the operation.

A resurgence in the pandemic, the extension or re-imposition of lockdown measures or firms voluntarily reducing operations would, however, lead to further disruptions to mining output.

While countries such as Mexico and Peru see lockdown measures not ending before April 30 and May 10 respectively, other countries are beginning to allow operations to resume. For example, after two weeks of a strict lockdown impacting all mines in South Africa  (except coal mines supplying state power utility Eskom), on April 16, South Africa allowed mines to restart at 50% capacity.

The company thereby expects international mineral production to either show tepid growth for iron ore and lead, and a decline in copper, nickel, tin, thermal coal, coking coal and zinc, in 2020.

In addition, Fitch notes its forecasts will “very likely” continue to evolve to the downside as it continues to revise individual countries' data in the coming weeks.


As lockdowns in multiple top-producing copper countries stifle growth, Fitch expects international mine production of the commodity to decline by 0.2% this year, compared with its previous forecast of 1.4% growth.

The most notable adjustments Fitch have made are to the second largest copper producing country – Peru, where the government implemented isolation measures in March, which led to miners curtailing operations. In one instance the Antamina mine, which produced about 448 000 t of copper in 2019, and is jointly owned by Glencore, BHP and Teck Resources, obtained first an exemption until April 13 previously, but in the end had to suspend operations as well.

Adjustments were also made by Fitch to China (third largest producer), the US (fourth) and Mexico (eighth).

In Mexico, the national government implemented a nationwide halt to non-essential businesses for 30 days in late March. The order includes mining as a non-essential business, thus leading to Fitch’s downward revision of its 2020 copper mine production forecast from 2% growth to a 6.5% contraction in the country.

Given the timing of the closures worldwide, Fitch expects these contractions in copper concentrate production to be primarily felt in the second quarter of the year, with production expected to increase in the second half of the year as lockdown measures are eased.

However, Fitch notes that operational activity over the second half of the year will not be able to offset current expected declines in global copper mine production.


In terms of zinc, Fitch expects only a slight contraction for this year, at 0.2%, compared with a previous forecast of 1% growth, as government measures and a depressed metal environment have led to operational closures.

Previously, the company expected production growth to be led by key producers such as India, Mexico and Peru.

However, recent government mandates and deteriorating mine economics at some operations have since led resulted in a revision down of forecasts across multiple countries.

For example, in Peru, Fitch now expects zinc mine production growth of 3.5% instead of 7.5% previously, while in India, the company has revised down all its mineral production forecasts by an average of 3%.

In Canada, Fitch expects the most significant shock to zinc production as Canadian miner Trevali Mining announced that it had placed the Caribou zinc-lead mine on care and maintenance on March 26.

Consequently, Fitch estimates that the mine accounted for about 11% of Canada's zinc mine output.

In total, Fitch now forecasts Canada's zinc mine production to now fall by 24% year-on-year this year compared with a previous contraction prediction of 2%.


Weakened base metals prices may disincentivise firms from ramping up production rapidly or to full production capacity even if lockdown measures are lifted, as factory closures and reduced construction activity have ravaged demand for metals as the global economic environment continues to deteriorate, Fitch warns.

The company points out that this has broadly left a mark on base metal prices broadly with the complex range trading near price levels not seen since the 2015/16 price rout.

However, should demand recover at a more protracted rate and prices stay near current levels over the coming quarters, Fitch says firms may be reluctant to rapidly increase production as additional supply could weigh on prices further.

Looking into production in 2021, Fitch highlights upside risk to its forecasts owing to low base effects and as projects set to come online in 2020 could be pushed to the following year.

“The longer current operations are reduced in 2020, the more upside risk we see to our current 2021 production forecasts as low base effects take hold.”