Photographer: Munshi Ahmed/Bloomberg

Swedish Miner Says Donald Trump Doesn't Hold Key to Metal Prices

  • Burgeoning middle class in emerging markets a bigger factor
  • Boliden CEO sees strong future demand from Africa, S. America

The operator of some of Europe’s largest copper and zinc mines expects President Donald Trump’s plans to spend on U.S. infrastructure to have much less impact on base-metal prices than the needs of burgeoning middle-class populations in emerging markets.

That’s because projects in the U.S. and other developed countries simply won’t use enough zinc or copper to have any significant impact on prices, Lennart Evrell, chief executive officer of Sweden’s Boliden AB, said in a March 22 interview. When poorer and less-developed countries decide to build transport and power networks they consume far more of these materials, he said.

“The U.S. is not big enough when it comes to commodities,” Evrell said. “It may be a very big economy, but when it comes to need for base metals, it’s more about the earlier stages of a country’s development, and the U.S. is not in that phase. We believe the driver behind the recent metals price increases is the rest of the world, and not Trump, as prices fell roughly as much after his election as they had gained in conjunction with his election.”’

While base metals gained after Trump’s election victory in early November, his promise of investment in U.S. infrastructure “has less effect than what you read in the newspapers,” Evrell said. Boliden, which is the world’s fifth-largest zinc miner and operates mines in Sweden, Finland and Ireland, along with smelters in the Nordic region, is instead betting on emerging markets.

“The countries that are leaving poverty, that’s where you start building prosperity: schools, transport systems and energy systems -- that’s what driving our development,” Evrell said  at the company’s headquarters in Stockholm.

Indonesia, Africa

In the past, much of the use of metals and appreciation in their value has been pushed by China and its urbanization, he said. But the country’s industrialization is slowing and migration from rural areas to cities is approaching the end of its expansion phase. Evrell said it will be possible to say “China’s journey is over” sometime around 2020 and, while the country will always be important to metals demand, it will over time “enter a slower phase.”

The source of future increases in base-metal demand will switch to other populous countries -- India and Indonesia -- and nations in Africa and South America, the CEO said. That’s cause for optimism for Evrell, because “almost half of the world’s population have not yet started the journey toward a higher standard of living -- the driver for our industry.”

The long-term outlook for base metals is “pretty good,” Evrell said. Zinc has climbed more than 70 percent since early last year, prompting concerns producers might reopen mothballed mines and affect prices. Even so, “the macro picture for zinc is looking good for a long time ahead,” he said.

Few New Mines

While copper may face downside risks stemming from oversupply, “many share our view that time is passing and not a lot of copper projects have been started following the copper-industry crash,” he said. “So perhaps we’re approaching a time when there may, fundamentally, also for copper be a deficit if global growth development continues.”

In the fourth quarter, Boliden reported a 25 percent increase in revenue to 12.1 billion kronor ($1.38 billion) while operating profit jumped more than five-fold to 2.35 billion kronor due to a “massive improvement” in metal prices from the year-earlier period as well as high production levels at Boliden’s mines.

In the first quarter of 2017, metals markets “have developed well,” with better prices and conditions than the average in the fourth quarter, Evrell said. Boliden shares have more than doubled in the past 12 months and are near their February closing peak of 286.9 kronor, which marked the highest price in 17 years, valuing the company at about $8.3 billion.

While Boliden has a chance of matching last year’s operating profit of 5.68 billion kronor, its best result since 2006, there are some factors beyond the CEO’s control. “It can, absolutely, but who knows where prices and currencies will go?”

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