Metals - Regional

Latin American metals, mining sector

Latin American metals, mining sector "mostly stable" in 2013 - S&P

By -

The outlook for the Latin American metals and mining sector in 2013 is mostly stable, although ratings agency Standard & Poor's (S&P) is expecting metals prices to continue to drop.

The prospects for slower global economic growth will continue to keep a lid on metals prices, according to the agency.

Sovereign distress in Europe and uncertainty due to potential fiscal adjustments in the US could add to commodity price volatility, S&P said in an industry report.

Economic growth in Latin America has slowed in line with the global economy, and S&P is expecting real GDP growth for the region to average about 2.7% in 2012.

"Still, we expect growth to recover to around 3.5% in 2013, assuming Brazil's economy picks up following a number of fiscal incentives and more flexible monetary policies," the agency said.

Economic growth in Chile, Mexico and Peru is forecast to remain around the same in 2013 as in 2012 thanks to strong domestic demand.

In S&P's basecase scenario, growth in the US will be up slightly to 2.3% from 2.1% in 2012. Chinese GDP will increase to 8.2% in 2013 from 7.5% in 2012, while Europe will contract around 0.8% in 2012, with no growth for 2013.

"As a result, we expect small price increases in iron ore and copper exports from Latin America or potentially marginal drops from current levels," the agency said.

S&P is predicting that steel prices will remain mostly flat due to excess supply and subdued demand in the developed world.

The downside scenario for Latin American economies, to which S&P assigned a 30% probability, sees flat average regional growth next year due to the risk of lower growth in Europe, the US and China.

"If this scenario were to materialize, we expect significant downward pressure on metal commodity prices," S&P said.

To read the full report, go to this link