London - After a crushing 2015, it might be another tough year for the mining industry.
The chief executive officers of Anglo American and Vedanta Resources are among mining bosses gathered for an industry conference in Cape Town who are cautioning that the worst may still be ahead and that companies must adapt to survive.
“Things may still get worse before they get better,” Anglo CEO Mark Cutifani said in a speech on Monday. “We can’t rely on a reversal of this price slump any time soon. For many of us in the industry, 2016 is already shaping up to be the most challenging yet.”
The mining industry was plunged into chaos last year as industrial-metal prices plunged 27 percent, the worst performance since 2008, as the market contended with excess supplies amid cooling demand from China, the world’s biggest consumer. Grappling with slumping profits, producers have been forced to scrap dividends, raise cash and cut debt to stay afloat.
Vedanta CEO Tom Albanese said he was hesitant to call the bottom and that the company was focused on meeting its debt requirements.
“Our peers in the sector are doing exactly the same thing,” Albanese said in an interview with Bloomberg Television on Monday. “The businesses are just hunkering down and getting that done. And those businesses that are best at it will be best-recovering.”
China’s slowest economic growth in a generation has led to oversupplies of metals. For that, the industry is largely to blame, Cutifani said.
South32 is also concerned about excess supply, CEO Graham Kerr said.
“Excess supply is awash in most commodities and as painful as it is, economically and rationally it needs to leave the market to create a long-term sustainable future,” Kerr told the conference. “I expect this challenging environment to persist for some time and market conditions are likely to remain volatile.”
Mining companies have sought different methods to combat the decline in metal prices. Producers including Freeport-McMoRan and Glencore have tapped shareholders for money, while Anglo joined Glencore in scrapping its dividend.
Anglo, weighed down by borrowing and with too many mines that don’t make money, has also unveiled a drastic downsizing that will see it cut more than half the company’s mines and eventually trims its workforce by 85 000 to 50 000.
“The tremendous changes taking place in the world, and particularly the depth and length of this commodity downturn, are forcing mining companies to look at themselves in a different light, and to respond accordingly,” Cutifani said. “No mining company is untouched and each has its own distinct issues to address.”