Metals and mining players are battling stiff economic headwinds, and many have filed for bankruptcy—especially in the coal subsector. To enhance the odds of surviving this protracted period of difficulty, companies will have to take smart action in three critical areas of their business.
At a glance
- The metals and mining industry has suffered a high issuer-denominated default rate, primarily because of the high legacy costs characterizing the industry.
- The prolonged downturn will likely continue, given that metals and mining companies are capital-intensive businesses with high fixed operating costs.
- Multiple forces have reduced demand for—and thus prices of—metals and coal. In this environment, debt-heavy capital structures aren’t sustainable long term.
- To manage through the downturn, companies must meet three imperatives: (1) instill a cash-is-king mentality across their organization, (2) drive cost reductions and operational efficiency, and (3) address capital structure issues early.