Boston, MA -- (ReleaseWire) -- 02/26/2014 -- We forecast the US mining industry will see modest growth over our forecast period, as we expect the bulk of mineral output and mining investment to occur in developing markets in Latin America. Still, we forecast the value of the industry to reach US$67.9bn in 2018, representing an average growth rate of 2.0% per annum. The country's stable economic and political environment, coupled with its long history of mining and mineral wealth, should enable sector expansion.
We forecast modest growth in the US mining sector through 2018, as lower copper and gold prices and only nominal growth in other base metal prices fails to incentivize significant production growth. Stronger US economic growth, including investment in automotive and manufacturing, should ensure the overall sector sees at least modest expansion. While we expect copper mining operations to remain profitable, we note that gold producers, in particular, are coming under increasing pressure both from falling prices and rising costs. Thus, we expect capital expenditure to remain subdued over the coming quarters and expect consolidation among some junior miners. Weak market fundamentals for zinc and lead will keep price gains modest in the coming years and we do not expect domestic mining companies in the US to invest much in developing these resources.
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Long Wait Times Mar Otherwise Solid Business Environment
Even with weaker market fundamentals, we expect the US to attract mining investment due to its vast natural resources, well-developed industry and infrastructure, and stable political environment. The US's mature capital markets also allow junior firms to find financing opportunities, though credit remains tight. We expect US growth to pick up in the coming quarters, which should support end-use demand growth for metal products, although as we noted before developed world economic growth has become less metalintensive over the past decade. However, long wait times to secure environmental and other operating permits are a significant detriment to new mining investment. Moderating metal prices and reduced capital expenditure targets, such delays may limit the ability of firms to commit to projects in the coming quarters.
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