South32 metals hit by coronavirus woes
South32 says demand among Asian buyers will remain patchy given uncertainty over the economic bounceback from COVID-19.
Global miner South32 says demand among Asian buyers will remain patchy given uncertainty over the economic bounce-back from COVID-19, while a potential sale of its Tasmanian manganese smelter has slowed due to the pandemic.
The Perth-based resources operator has seen alumina, metallurgical coal and manganese output decline in the third quarter as government measures to slow the spread of coronavirus took hold.
South32 said China and India remained its two most important markets, with contrasting outlooks for how each may bounce back from the economic rout.
“If you look across our commodities, alumina and metallurgical coal have been two of the major drivers and had quite a strong push down,” South32 chief executive Graham Kerr told The Australian.
“That’s driven by there not being enough economic demand at the moment for the products. I expect China will slowly start to position itself to reopen and they’ll have to put the economy back to work and they’ve got a good track record in doing that. In places like India the discontinuity could be a bit longer and it’s a bit more uncertain.”
Still, manganese prices have recovered from 2019 lows, partly due to the lockdown in South Africa, where South32 operates, and the miner also remains positive on zinc and nickel.
“We talk a lot about demand but if you look at products like zinc and nickel in places like Peru and Indonesia you are starting to see the supply side impacted,” Mr Kerr said.
“I don’t think it’s all pessimistic and in the medium to long term the resources industry is a good place to be.”
South32 also said a review had been delayed into the future of its Temco manganese alloy smelter in Bell Bay near George Town in northern Tasmania, due to COVID-19.
Three options are on the table: placing Temco into care and maintenance in the hope prices recover, permanently closing the plant or offloading to a third party.
South32 said it wasn’t an asset it wanted to own in the long term but talks over selling the plant had slowed as COVID-19 dampens economic sentiment.
Selling the asset “is probably our preferred option because it keeps jobs and investment in the local community,” Mr Kerr said.
“That has been progressing pretty well but obviously with COVID-19 travel restrictions and a little bit of economic uncertainty that’s probably slowed down a little bit.”
George Town mayor Greg Kieser has previously said the government had made “offers” to the global mining and metals company to try to save the smelter and its 300 jobs.
Manganese production for the full year is now expected at 3.38m tonnes, from a prior 3.56m tonne forecast, reflecting lower year-to-date throughput and reduced productivity expectations.
South32 shares fell 3.4 per cent on Monday at $1.99.
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