Commodity prices generally have been in correction mode, including iron ore which is down around 20% from the recent highs. I see this as being a temporary corrective phase rather than something more sinister. Tonnes of the steel-making ingredient will be needed as part of the post-Covid reboot, and infrastructure roll-outs. Against this backdrop of robust demand, supply challenges are likely to persist for some time.
I think it is telling as well that the likes of Rio and BHP have held up relatively much better during the correction in the base metal, which tells me the market generally is looking through to the other side of current commodity price weakness. We hold BHP in the Global Contrarian Fund, and in the managed account portfolios, where we also have exposure to Rio and Fortescue Metals as well. BHP’s results next week will be closely watched, with a bumper dividend likely, and management outlook statements set to be carefully scrutinised.
