Mexican Mining Stocks Affected by Falling Metal Prices

Interest rate projections from the US Federal Reserve have pushed gold prices down, causing the prices of other precious metals to drop as well. Furthermore, China's plans to release its industrial metal reserves caused copper prices to fall even further. These two events strongly impacted the market value for Mexican mining companies.

Last week, the price of gold fell 2 percent at US$1,776.10 and had its worst week in more than a year, causing all precious metals to topple as well. This occurred because the dollar increased after the US Federal Reserve released its projections for the first interest rate hikes after the pandemic.

The US Federal Reserve announced that it forecasts personal consumption expenditures (PCE) to rise to 3.4 percent in 2021, which is higher than its March forecast at 2.4 percent; inflation is expected to fall to 2.1 percent in 2022; and the timeline for raising interest rates is expected to happen in 2023, which was previously planned for 2024.

As a consequence, metal prices began to fall shortly, affecting the shares of many Mexican mining companies. For instance, Industrias Peñoles shares fell 5.04 percent to MX$282.85 (US$13.70), while Grupo México's shares fell 1.92 percent to MX$86.64 (US$4.20). The fall in the price of Peñoles shares represented a loss in its market capitalization value of MX$6.215 billion (US$300.95 million) in one day. While Grupo México lost MX$13.234 billion (US$640.81 million) in market value. Between both mining companies, the value lost in one day totaled  MX$19.450 billion (US$941.76 million), reported El Economista.

Since last week, Grupo México is going through a difficult time as a result of Peru's elections which gave victory to Pedro Castillo. Its value went from MX$776.086 billion (US$38.86 billion) to MX$726.729 billion (US$36.36 billion), a total loss of MX$49.356 billion (US$2.47 billion) in market value. Meanwhile, its BMV shares went from MX$99.69 (US$4.99) to MX$92.17 (US$4.62), reported MBN.

Copper prices fell further during the week, reaching their lowest level in two months. Copper on the London Metal Exchange (LME) fell 4.63 percent to US$9,276. In addition to the US federal reserve projections, copper was also affected by China´s plans to release industrial metals from its reserves to halt rising commodity prices, which are a risk to the global economic recovery.

China announced its plans on Thursday through its Economic Planning Agency Meng Wei, reporting  this plan would mainly affect copper, aluminum and zinc. The agency announced that the metal would be sold in batches, without specifically mentioning the quantities. After this announcement, Minera Frisco shares fell 0.71 percent on the BMV to MX$4.21 pesos (US$.20), while Fresnillo shares fell 3.36 percent at the London Stock Exchange.