Mining sector: fundamentals remain strong

For now, the global economy is still growing, despite geopolitical problems, trade disputes and hurricanes. Unfortunately, if you look at the price of base metals, especially copper, it looks like a recession is imminent. The economy will admittedly be less strong in 2019. However, the sharp decline in copper reflects, in our opinion, much more the fear of the escalation of the trade dispute between China and the US, than the real prospects of the demand for metals. In fact, if short-term turbulence is ignored, the needs are huge and by far exceed Chinese demand. In addition, these needs are not covered by current production. Projects such as “the new silk roads”, or the urbanization and industrialization of ASEAN countries will require significant investments. This means that mining projects operating at higher costs will have to be approved to cope with this increased demand. The corollary is that large mining groups, benefiting from a better cost structure will be able to generate even more free cash flow. The fundamentals of the mining sector are really very solid.