'Mini-upcycle' in commodities underway

Macquarie believes commodities are in the early stages of a mini-upcycle that could play out over the next 1-3 years.
26th June 2020
Resources Rising Stars

Macquarie believes commodities are in the early stages of a mini-upcycle that could play out over the next 1-3 years.

Analysts believe the wave of stimulus spending by global governments to aid the recovery from the COVID-19 pandemic will drive demand for commodities.

"We believe a mini-upcycle in commodities started in April 2020 (a month after the low in equities)," Macquarie said.

"We expect this upcycle to be driven by the recovery from COVID-19 shutdowns plus increased fiscal stimulus to support commodity intensive infrastructure and construction activity (due to high multipliers)."

Deutsche Bank made a similar prediction earlier this month when it upgraded commodity price forecasts and suggested the market could be in a mini super-cycle.

"We expect domestic demand in China to continue to surprise to the upside, and Latin America remains an ongoing source of supply risk," DB said.

"A credit-fuelled metals restocking surge in China has been the key positive surprise, which has offered a sizeable offset to lockdown-related demand weakness elsewhere.

"Whilst onshore physical demand will moderate in H2, end demand remains underpinned by positive construction trends and will be adjoined by mounting bursts of pent-up ex-China
demand."

DB sees "stronger for longer" iron ore at US$90 per tonne in the second half and $85/t next year, and a copper price rising to $6250/t next year as the market balances.

Macquarie also sees copper outperforming due to reflation.

Read more at https://www.miningnews.net/research/news/1389367/%E2%80%98mini-upcycle%E2%80%99-in-commodities-underway

 

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