An opinion piece by analyst, Wood Mackenzie has revealed that the iron ore and zinc sectors will perform best on average; while copper, export metallurgical coal and gold will be most challenged.
Wood Mackenzie finds that amongst the bulk commodities, iron ore stands above the rest. Despite pulling back from 2012 levels with a 19% cash margin decline, iron ore still has a very strong average industry margin of US$49/tonne (52% of average price) in 2014, enabling continued large cash generation in this high volume business.
This supports the on-going focus by the major producers like Rio Tinto (ASX:RIO), BHP Billiton (ASX:BHP) and Vale (NYSE:VALE), on pushing ahead with expansions at their low cost iron ore operations.
Despite pulling back from 2012 levels with a 19% cash margin decline, iron ore still has a very strong average industry margin of US$49/tonne (52% of average price) in 2014, enabling continued large cash generation in this high volume business.
This supports the on-going focus by the major producers like Rio Tinto, BHP Billiton and Vale, on pushing ahead with expansions at their low cost iron ore operations. It is also in stark contrast to coal and bauxite, both of which have average margins of less than 25% in 2013 - the outlook is particularly bleak for export thermal coal with an average margin of only 19% in 2014.
Operating costs in the mining industry have risen rapidly over recent years, but now that prices have dropped there is a renewed focus from mining companies on reducing costs and trying to protect margins.
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