The impact of COVID-19 on the mining industry has been strained by the struggling global automotive industry, which consumes approximately 17 per cent of iron ore globally, a report from GlobalData.
Light vehicle sales fell by 24 per cent in Q1 (January-March) 2020 globally, then by 47.5 per cent in April 2020 and 33.8 per cent in May 2020.
Although sales were boosted by improvements in China in May, where light vehicle sales rose by 8.1 per cent y-o-y, over the second quarter global sales are expected to drop by 34 per cent. Slow demand in the automotive space will have a knock-on effect and reduce demand for iron ore, says GlobalData, a leading data and analytics company.
“COVID-19 is expected to significantly impact global iron ore consumption, which is projected to drop by 2.8 per cent to reach 2034.6 million tonnes in 2020. This drop reflects how the market has been directly affected by COVID-19, with workers unable to get to sites and severe disruption to the delivery of key materials and equipment, as well as the impact of widespread disruption to economic activity,” the reports states.
Due to the likely drop in investment, with planned projects in commercial and industrial buildings sectors potentially being put on hold or cancelled, GlobalData expects the global construction output to contract by 2.8 per cent in 2020. “Only once the virus is under control can the industry rebound and global demand return,” it says.
In the long-term, it is expected that global iron ore consumption will grow at a compound annual growth rate (CAGR) of 1.3 per cent over the forecast-period (2021-2024), to reach 2,193.8 million tonnes in 2024 – supported by a strong demand for growth in India and China, alongside continuous development across Russia, Japan, South Korea and Brazil.