Covid-19 Executive Briefing

Understanding the economic impact of the Covid-19 pandemic and the implications for the power sector

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- ECONOMIC IMPACT -

Latest update: 20 April 

Many economists have cut their GDP forecasts. The 2020 consensus forecast for GDP growth is currently negative and many predict a recession.

Major markets remained volatile during April as oil prices lost all recent gains.

3%

The IMF has forecast the global economy will contract by 3% in 2020 as lockdowns cause a dramatic drop in economic activity.

$2-$3 trillion

Expected reduction in investments in the commodity-rich exporting nations, according to UNCTAD

Impact of Covid-19 on asset prices

- SECTOR IMPACT: mining -

Latest update: 20 April 

GlobalData analyst view:

"Lockdowns and closure of non-essential businesses and operations is particularly impacting platinum, copper, silver and gold, with only coal mines largely exempt."

Some countries, such as Argentina, have declared mining an essential service, and brought an end to suspensions. Whilst the lockdown in Zimbabwe was extended to 3 May, it too has allowed mines to open.

On the demand side, a slowdown in construction activity, initially in China and now increasingly across the rest of the world, is particularly impacting demand for copper, iron ore and aluminium, with the latter also impacted by reduced automotive manufacturing.

Lower automotive manufacturing will also impact demand for platinum and palladium, which are used in autocatalysts.

impact on financing and operations

Reflecting the extent to which governments around the world have imposed lockdown measures to contain the spread of Covid-19 and the resulting severe economic shock, GlobalData expects global construction output to contract by 1.4% in 2020.

On 17 April Rio Tinto advised CAPEX for the full year would be between $5-$6bn, down from the previous guidance of $7bn, partly due to Covid-19, but also partly due to the strength of the US dollar.

Earlier in the week Whitehaven Coal advised that it does not expect to consider making a Final Investment Decision on any of its growth projects in 2020.

With concerns over infections being brought in by FIFO workers, Rio Tinto is trialling a rapid blood-testing system for FIFO workers before they board their flights to its Western Australian mines.

Previously South32 had announced cuts of $160bn over the next 15 months, of which $150m would be sustaining CAPEX and $10m exploration CAPEX, while Antofagasta has revised its CAPEX guidance for 2020 to between $1.3bn and $1.5bn, as opposed to the $1.5bn previously announced.

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