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Deutsche Bank had recently reported more frequently on the soaring prices on the various commodity markets. In a recent newsletter article, the bank discusses the investment backlog in the mining sector.

Investment backlog in mining - are prices now rising?
Investment backlog in mining – are prices now rising?

Extreme investment backlog in the mining sector

After mine operators, whose share prices have already developed very well, manufacturers of mining equipment such as wheel loaders, bulldozers and excavators could be the next to benefit – because the mining sector has an extreme investment backlog.

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Mining equipment significantly outdated

Not only has the average age of equipment risen to a new all-time high of eleven years, exceeding the normal service life in every category; ore quality is also steadily declining, meaning that more and more rock has to be processed.

Liquidity high for mine operators – capital expenditures could rise 20%

In addition, experts estimate that mine operators worldwide will have up to $150 billion in free cash on hand this year as a result of the sharp rise in commodity prices. As a result, investments in new equipment could rise by around 20 percent to almost 70 billion US dollars in 2021.

Ore quality declines continuously – what are the consequences?

The decline in ore quality is likely to lead to rising raw material costs for the foreseeable future. This is because significantly higher costs will have to be incurred in order to maintain the current ore quality. This in turn is likely to have an impact on the end products.

Source: deutsche-bank.de


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