Moody’s Investors Service has maintained a stable outlook for the global base metals industry despite expecting performance in the sector to weaken over the next 12 to 18 months.

The financial services company says the base metals sector’s performance will weaken as a result of continued trade tensions between the US and China; uncertainty regarding the North American Free Trade Agreement between the US, Mexico and Canada; and slowing global economic growth.

Over the outlook period, Moody’s predicts prices will remain below 2018 levels and that rising costs will put margins under pressure.

Resource replenishment and capital spending management will remain key considerations for future performance and increases in demand will bode well for higher prices in the long term, the company notes.

“Exploration and development expenditures have increased following several years of decline, as companies focus on restoring their finances.

“Given the depleting nature of the industry and [the] years necessary for a new greenfield mine to reach production, the development of new mine supply for copper, nickel and zinc remains necessary. The announced rollout of battery electric vehicles creates significant new demand over time,” Moody’s states.

The company adds that changing royalty and tax regimes, and mining regulations, will remain challenging and lengthen the development time and cost of new base metals projects.

Meanwhile, the company’s environmental heat map categorises the mining and metals industry, but excluding coal as having an elevated emerging risk profile across key environmental areas. This will result in increased costs going forward and longer permitting and approval times for new projects.

The outlook could move to negative if purchasing managers’ indices (PMIs) in the US, Europe and China track below 50 for two consecutive months and also if the global macroeconomic outlook for gross domestic product (GDP) growth falls to less than 3%.

Moody’s says a positive outlook will require the three major PMIs to top 55 for at least three consecutive months and that global GDP growth be greater than 4%.