Mining Indaba: US trade aggression could stall African metals investment, deepening supply gap

US protectionism could stall mineral processing investment around the world as supply shortages threaten to squeeze markets, an industry conference heard Monday in Cape Town, South Africa.New trade measures have created uncertainty. They could delay projects needed to close a widening production gap, Standard Chartered Bank’s global head for metals and mining, Richard Horrocks-Taylor, said at the Investing in African Mining Indaba.The new U.S. tariffs announced this weekend may trigger growth shocks and spark inflation, he said.“Trade policy uncertainty will create an environment where capital hesitates,” he said.The conference heard that strong long-term trends remain intact. Electrification, renewable energy and global infrastructure spending will boost base metals.Copper prices, for instance, are forecast to climb to an average of $9,900 per tonne this year, while aluminum could see a 10% upside over the next three years. Yet, these bullish fundamentals clash with the threat of U.S. tariffs and have made investors cautious, the conference heard. One panel, including representatives from Geneva-based trading houses Mercuria Energy Trading, and Trafigura, as well Canaccord Genuity from Vancouver, urged policymakers to offer clear, stable trade guidelines. They said macroeconomic risks are delaying mining investments in Africa. It’s a trend that could worsen supply shortages as demand grows and may rob the continentAfrica firstMantashe noted U.S. moves last week to limit foreign aid to some African political policies. He argued that Africa should not let industrialized nations dictate its choices.“They want to withhold funding, but they still want our minerals,” he said. “Let’s withhold minerals. Africa needs to assert its advantage and take charge of the growing demand.”South Africa’s Minister of Mineral and Petroleum Resources, Gwede Mantashe urged African nations to use their minerals. They must resist global trade that exploits their countries, he said. For example, China’s chromite dominance undercuts local mining firms feeding into it and stifles sustainable development, he said.For this reason, South Africa’s income from chromite mining is low. Yet China’s beneficiation advances have reduced chrome prices and hurt African miners, he said.“This is what I call a race to the bottom. We race with one another to the bottom by not taking advantage of what we have, and that will become victims of what we have. We can’t allow that to happen forever.”At a crossroadsPhilip Clegg of New York-based private equity firm Orion Resource Partners warned that the continent’s mining sector is at a critical juncture.“The long-term outlook for copper and other electrification metals remains strong, yet near-term policy uncertainty could slow down investments needed to meet future supply,” he told a fully packed conference session on commodities.Time sensitiveGraeme Train, head of metals and minerals analysis at Trafigura, noted that copper demand is set to surge nearly 30% over the next decade. He said forecasts show an extra 8.5 million tonnes of copper demand ahead. However, only around 2 million tonnes are secured through current projects. This leaves a gap of roughly 6 million tonnes, a shortfall that could push prices higher if new mines do not come online swiftly.Wood Mackenzie analyst James Whiteside underlined the urgency. He says the industry currently spends between US$15 billion and US$20 billion annually on expansion just to maintain current output. To follow the path toward net zero by 2050, the sector needs to spend another US$20 billion per year to grow to the required level, on top of US$20 billion to stand still.Inflation and higher interest rates for a period forced many mining firms to delay investment decisions on major projects, Whiteside said.Tough decisionsThe analyst also highlighted other commodity headwinds. He noted that, for lithium—a key battery-marking metal—the market requires $8 billion per year in investment to keep pace with demand. Despite a recent spike driven by exuberance in the lithium market, many projects were scrapped as companies re-evaluate returns in today’s high-inflation, low-lithium price environment, he said.For lithium, Whiteside found that a striking 85% of project capacity achieves a 15% internal rate of return (IRR). He compared these numbers to gold projects in Africa. There, the weighted average pre-tax IRR jumps to 63%. This shows the high returns possible in that area. In contrast, less than half of nickel projects meet this 15% IRR threshold, he said.This trend of delayed or downsized investments spans other commodities as well, from zinc to aluminum, Whiteside said.Meanwhile, Raj Khatri, managing director and head of metals and mining for Europe, the Middle East, and Africa at Canaccord Genuity, pointed to Africa’s growing role in metals production. He said 14% of global mining investment now goes to Africa. Projects in Zambia and Guinea promise to double output in three years, he said. However, Khatri stressed that investors may avoid these opportunities due to uncertain U.S. trade policies.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com