Perspectives
Mining
The energy crisis related to the Russia-Ukraine conflict, high global inflation and tightening monetary policy are holding back economic growth. The price of the main commodities in which we invest has held up well, supported by very low inventories and increasing supply disruptions.
Despite this, companies continue to generate comparatively strong cash flow, which Fitch Ratings expects to remain at similar levels in 2023. With iron ore trading at USD90 per ton, iron ore miners’ cash flow generation will be significantly reduced in 2023, but leverage should remain at healthy levels following the large inflow of resources they received over the last four years, which allowed them to strengthen their balance sheets. The price of lithium has seen an impressive record high driven by demand from electric car manufacturers.
Supply is falling short of this demand momentum, which has sharply reduced inventories. This is insulating lithium prices from the general downturn in global metals markets.
All in all, ICBMPlus will maintain investments in commodity mining by focusing its investments on companies that have best adapted to the current economic situation.
Innovative solutions are reshaping the energy system and opening up new possibilities for a decarbonized future, much faster than expected. Innovations in technology, policy and markets are being implemented around the world. Significant advances have been made in electric mobility, battery storage, digital technologies and artificial intelligence, green hydrogen, renewable energy procurement, among others.
These changes are also bringing increased attention to the need for sustainable exploitation and management of rare soils and other minerals, and investment in the circular economy. New and smart grids, ranging from mini to super grids, reinforced by enabling policies and markets, are improving the power sector’s ability to cope with the variability of renewables. Direct uses of renewables – including bioenergy – and green hydrogen are providing much-needed solutions in transportation, buildings and industry.
ICBMPlus will focus much of its investment efforts on the energy system sectors in the coming years by increasing its presence in Europe and Asia.