Technology, convergence and new markets are key to M&A activity in mining and metals.
The 21st edition of the EY Global Capital Confidence Barometer (pdf) indicates that 63% of mining and metals executives anticipate that the economy will have a positive impact on the sector in 2020. Strong earnings growth, combined with stronger balance sheets and reduced debt, supports their positive outlook for 2020. However, 45% of the executives expect an economic slowdown by 2021. As such, companies need to continuously evaluate portfolios, manage cash and consider divesting non-critical assets.
Despite concerns on environment-related policies and political uncertainty, demand for mineral growth from decarbonization will be a key growth driver for the mining and metals sector
The interconnected nature of the modern global economy presents many downside risks that mining executives are constantly monitoring. In line with findings in the Top 10 business risks and opportunities report — 2020, 17% of mining executives believe growth will also be impacted by geopolitical or local political uncertainty. US trade protection measures have disrupted trade and M&A activity in the metals sector. Meanwhile, 16% of respondents cite the focus on climate-change-related policies or reducing carbon footprints as a key barrier to growth. Mining companies have a significant role to play in reducing emissions, and key mining players have already introduced actionable targets. Companies also plan to increase production as they look to tap into demand for new-world commodities such as lithium, cobalt and nickel.