Global copper producers navigate challenges with steadfast financial foundations amid energy shift: FITCH
Nov 28, 2023
New Delhi [India], November 28 : In a recent assessment by Fitch Ratings, the 2023 sector credit outlook for global copper producers emerges as stable, propelled by resilient copper fundamentals, robust financial positions, and a commitment to deleveraging.
The report sheds light on the positive financial indicators of copper producers, emphasizing the surging demand fueled by the metal's pivotal role in the ongoing global energy transition.
The stability in the credit outlook for the sector finds its roots in the constructive copper fundamentals, where a surge in demand intersects with supply challenges.
Copper, recognized for its crucial role in the energy transition, faces impediments such as disruptions in mining operations, diminishing ore grades, and delays and cost escalations in various projects, collectively exerting pressure on the global copper supply.
The dedication of copper producers to deleverage and maintain financial agility, especially following the commodity price downturn in 2015/2016, has yielded robust financial metrics across the sector.
Fitch underscores that a majority of issuers showcase low financial leverage and possess ample liquidity. This strategic emphasis on financial strength positions copper producers to adeptly navigate challenges and seize opportunities amid the evolving dynamics of the market.
Fitch foresees the normalization of excess liquidity and rating headroom prevalent among copper producers through 2025. This normalization aligns with expectations of moderating copper prices and the alleviation of cost pressures.
Concurrently, Fitch anticipates an enhancement in free cash flow (FCF) for producers as near-term capital programs conclude, leading to a reduction in capital expenditure (capex) and subsequently amplifying earnings.
The report projects copper prices to average USD 8,000 per tonne in both 2024 and 2025.
Although this projection stands lower than the cycle peak exceeding USD 10,500 per tonne, it remains modestly higher than the midcycle assumption of USD 7,500 per tonne.
Fitch's comprehensive analysis underscores the resilience of global copper producers, showcasing their adept navigation through price fluctuations and industry dynamics.
