Metals prices are up, but mining companies aren’t spending. Their restraint could keep supplies tight and magnify shortages of raw materials such as copper and zinc that are critical for the transition away from fossil fuels.
Project spending by 10 large mining companies, including Rio Tinto PLC, RIO +1.29% BHP Group Ltd. and Glencore PLC, GLNCY 4.61% is expected to stay at roughly $40 billion this year and next year, according to figures compiled by Bank of America Corp. That would put capital expenditures well below a 2012 peak close to $80 billion, the bank’s figures show.
Much like the oil industry, mining companies are responding to pressure from investors to give priority to dividends and share buybacks, rather than heavy spending. A recent push to limit the sector’s environmental damage also pinched spending.
The low expenditures set the stage for the recent rally in copper and iron ore, the main ingredient in steel. Both materials are up more than 40% in the past two years, driving up costs for solar panels, wind turbines and batteries. The trend threatens to hamper the shift to renewables, which is driving rising demand for these metals.