Rudi's View | Oct 10 2024
By Rudi Filapek-Vandyck, Editor
"[...] feedback from our recent investor meetings across New York and London suggests positive commodity and share price momentum may continue near term but most investors are looking to fade the rally in the Dec quarter."
That quote from a recent Goldman Sachs research update on the status and outlook for bulks, base metals and steel illustrates the ruling skepsis around the globe about China's intentions and the related outlook for commodities.
Many believed shares in BHP Group ((BHP)), Rio Tinto ((RIO)) and others across the sector had been sold down too far, but a swift rally on institutional portfolio switching and China stimulus enthusiasm has poured cold water over too high expectations for what may follow next.
Those previously under-valued share prices have quickly rallied by double-digit percentages. Maybe it all went too quickly?
As far as Goldman Sachs is concerned, the analysts see little reason to still be optimistic about iron ore when the price is near US$110/tonne, but they do like prospects for metallurgical coal, with their constructive view confirmed during a recent India trip.
No respite is still seen for battery-related materials, which might well need another 12-24 months to get on a sustainable up-trend yet again, suggests Goldman Sachs.
In a broad sense, Goldman analysts argue the supply side has done most of the heavy lifting in 2024. The onus is now on demand to pick up and fundamentally improve conditions for miners and developers, and adjacent services providers.
Are currently Buy rated:
-Rio Tinto
-BHP Group
-South32 ((S32))
-Coronado Global Resources ((CRN))
-Champion Iron ((CIA))
-Deterra Royalties ((DRR))
-Lynas Rare Earths ((LYC))
-Iluka Resources ((ILU))
-BlueScope Steel ((BSL))
Both Fortescue ((FMG)) and New Hope Corp ((NHC)) are rated Sell.
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