Weekly Mining & Projects Roundup
The relatively strong performance of the Bloomberg World Mining Index over past weeks is set to reverse as it meets with stiff resistance around the 250 mark. Approaching Q413, we forecast increased headwinds for metal prices as Chinese metal demand growth weakens due to structural economic slowdown. To quantify this outlook we have initiated a bearish iron ore view. I ron ore prices have the potential to move down to US$110/tonne by end-year, approximately 15% below current levels.
Glencore Xstrata 's solid performance this month supports our view that the company is well positioned to weather the mining sector storm due to its diversified portfolio and significant proportion of revenue derived from its trading arm. Norilsk Nickel 's announcement for significant capex cuts and restructuring have allowed for a similarly solid monthly performance. We highlight that the ground gained by Peabody Energy is more indicative of a very poor performance over the previous 12 months , as weak coal prices and rising environmental legislation mean that the outlook for pla yers in the US coal industry remains broadly negative. Perhaps the most surprising performance is that of AngloAmerican , considering its positive trajectory despite a month of strike action and uncertainty in the South African mining sector. To explain this we highlight that much of the industrial unrest had already been priced into the company's stock.
Key Developments: EMEA
|Uptrend To Meet Resistance|
|Bloomberg World Mining Index (Weekly Chart)|