Poland Mining Report Q2 2016
BMI View: Growth in the Polish mining sector will be modest over the coming years. The coal sector willbe overhauled as the government seeks to either restructure or close unprofitable mines. Copper output willstruggle as falling copper ore grades and weak prices are set to hinder growth. Nevertheless, the rate ofgrowth we forecast indicates that the country will remain one of the most significant players in theEuropean coal, silver and copper markets.
The main downside risks to our forecasts are weak copper and coal prices, cheap coal imports and labourunrest in the sector. Due to our view for a sharp slowdown in Chinese economic growth and expectation forincreased copper supply, we expect lower copper prices over coming years. We forecast copper prices toaverage USD6,450/tonne over 2014-2018, significantly lower than their 2011 average of USD8,826/tonne.
Combined with falling ore grades in Poland, these lower prices will significantly disincentivise investment in the sector. Lower commodity prices will also have the effect of squeezing miners' margins, precipitatingcutbacks and thus heightening the risk of industrial unrest. Poland's mining sector is comprised of strongunions and as such we highlight tense wage negotiations and potential strikes to affect the sector overcoming years.
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