With China’s growth slowing, ongoing weakness in Europe, and tumbling copper prices, Moody’s Investors Service is turning negative on the global base metals industry.
The rating agency announced today that it has changed its outlook for the sector to negative from stable, citing weakening economic growth, falling investor sentiment, and plunging copper prices.
“Our change to a negative outlook on base metals is driven by a combination of factors,” says Carol Cowan, a Moody’s senior vice president. “Slowing growth in China’s GDP, continued weakness in Europe and falling copper prices have all contributed to our revised outlook.”
Moody’s notes that the International Monetary Fund (IMF) recently lowered its forecast for global growth in both 2015 and 2016; and that this is contributing to the sector’s dimmer outlook, as base metal consumption growth is closely tied to industrial production and GDP globally. In particular, slower economic growth in China “does not bode well for the industry, given that China consumes more than 40% of base metal production,” Moody’s says.
“Although the U.S. economy is strong and consumption of base metals remains robust, it’s not enough to counter weakening global trends,” notes Cowan.