Monthly Commodity Update – Producers aiming to survive low prices

by: Georgette Boele , Casper Burgering , Hans van Cleef , Frank Rijkers

In current low price environment, many commodity producers are lossmaking. Cost savings have thus become increasingly important and this forces producers to take a critical look at their production process and cost efficiency. The current low oil prices are substantially below the cost price of many oil producers. Nevertheless, they have continued to produce in order to generate cash flow or to keep market share. In metals markets, the drop in oil prices and the sharp depreciation in local currencies has pushed down cash costs for mining metal ores. For example the average cash cost to mine gold have decreased and this is likely to continue going forward. At the same time, miners are in a fierce re-structuring phase in order to survive. They will disinvest non-core activities or close non-profitable units. This process will result in lower supply coming to the market and ultimately this will support prices.

Commodity-update-ENG-Feb-2016.pdf (107 KB)