An industry agency council was established by the World Economic Forum in 2014 to serve as an advisory board on the future of the mining and metals sector. More than 200 industry experts, business leaders, policy analysts and investment advisers were brought together to develop various outlooks stretching out as far as the year 2030.
More than 50 different driving forces of mining and metal prices were identified by the IAC. These included such influences as population growth and consumer behavior (social factors), energy innovation and mineral substitutes (technological factors), global economic growth and fiscal policies (economic factors), and projected levels of state intervention and trade liberalization (geopolitical factors).
Long-Term Outlook for Metals and Mining Investors
Even though precious and industrial metals commodity prices dropped for much of 2013-2014, many prognosticators agree that the long-term outlook for the metals and mining sector investing remains strong. Part of this confidence stems from the lack of enthusiasm demonstrated by many public investors near the beginning of 2015; better buying opportunities tend to be found when prices are low.
Gold prices receive the most attention, but gold is only a small part of the metals and mining sector.
Gold and silver will continue to serve as counter-cyclical hedges and are seen as safe havens during times of recession, inflation or uncertain monetary policy. Investors have come back down from the investment gold rush of 2011, but that downward trend can't continue forever.
Industrial metals, such as copper and steel, will continue to be tied to the economic growth in China and India. In fact, several of the top global mining corporations are majority-owned in China, India or Brazil. It's impossible to predict the degree of economic liberalization or cartelization that will be exhibited by BRIC nations, but their influence on commodity metal and mining stock prices should be considerable.
Long-Term Outlook for Metals and Mining Corporations
Research at Bloomberg found that the ore grades of the largest market-cap mining companies across the world have fallen dramatically since 2003. This suggests that further exploration is becoming more difficult.
There are two opposing forces at play in the mining and metals sector: resource scarcity and product innovation. These same forces compete in any natural resources marketplace. As resource deposits dwindle, costs increase, and capital needs across the industry rise accordingly. Prices will rise. Eventually there will come along a new product, technique, technology or shift in consumer tastes that will alter the metals and mining landscape. When it does, some companies will adapt better than others and will realize greater margins.
Mining companies also have to contend with environmental regulations, which are likely to become more stringent in the future. Additional taxes will cause some to reduce or stop production. Many experts believe that the mining community is cautious because it is uncertain about the regulatory environment ahead. Some companies, countries and regions will adapt to these circumstances better than others.