Policy uncertainty, resource nationalism and environmental protection key themes for Asia mining

In a recent overview of key mining themes in Asia, Fitch predicts rising geopolitical tensions and pressures to the global economy will continue to evoke volatility in commodity markets, heightening risks to metal demand and prices.  

In 2020, Fitch expects risks to the Chinese economy will continue to rise, with no easy resolution to the trade dispute with the US on the horizon, which will prompt further monetary and fiscal stimulus from the government to cushion the downside pressure on growth.

Analysts say this will buoy domestic metals demand and prevent any metal price collapse, which will in turn support mining sectors in the region. But Fitch notes that a slowdown in the automotive industry in China, poor relations with the US, and environmental regulations continue to pose risks. 

In Asia as well as globally, Australian miners who benefit from supportive government regulations and advanced infrastructure will spearhead the disruptive technology movement in mining. Indonesia’s policy uncertainty and resource nationalism will rumble on, Fitch says, with the new nickel ore export ban taking effect from January 2020, resulting in more foreign miners selling their operations to local stakeholders while new foreign investment is deterred.  

Mongolia will continue to register the fastest mining industry value growth in Asia with high-grade reserves of gold, copper and coal, and a strong pipeline of large projects.  

Analysts say China will remain the overarching risk generator in metals markets over the coming quarters, as Chinese macroeconomic policy will continue to attempt to cushion domestic industries from the effects of a serious trade conflict with the US and a general slowing of the economy.  

Fitch believes the increased government support to domestic industries since H218, that will likely only intensify as macroeconomic headwinds build, will support demand for base metals in China. The measures aimed at boosting infrastructure are already feeding through with the start of construction works for a number of projects in recent months.