Very interesting read......Copper Tapped as the Next Big Metals...

Very interesting read......

Copper Tapped as the Next Big Metals Trade of 2020

By

Aoyon Ashraf

December 17, 2019, 3:09 AM GMT+8

Most analysts arepositive on base metal miners next year

Copper, often called “Dr. Copper”due to its correlation with the economic cycle, could be the trade of 2020, asmost industry analysts expect a “lift-off” for the metal as global demandrecovers.

Gold miners had ablockbuster year in 2019 owing to expectations of U.S. Federal Reserve ratecuts and as geopolitical tension mounted between the U.S.-China. But concernabout dampened global demand as a result of trade threats left base metalminers limping into the new year.

But that might reversenext year thanks to improved demand, making copper “poised for liftoff,”according to Jefferies analyst Christopher LaFemina. Low copper inventories,high short positions, supply constraints and better demand are creatingconditions for the metal to rally, he wrote in a note to clients.

Joining LaFemina inhis optimism is Goldman Sach’s Jeffrey Currie, who thinks copper is “set toinflect” in 2020 due to strong growth out of China. Morgan Stanley, Bank ofAmerica and Citi also have positive expectations for copper and an improvingglobal economy.

History shows thatbase metal miners have often caught up with gold equities after precious metalsoutperformed. The S&P/TSX Equal Weight Global Base Metals Index (TXBE)underperformed the S&P/TSX Equal Weight Global Gold Index (TXGE) in 2016,but caught up by the end of 2017. If analysts are right about the outlook forcopper in 2020, the same trend may be coming soon.

Here is what theanalysts are saying about what to expect for metals and mining in 2020:

Jefferies

The firm is mostbullish on copper miners for 2020 as current supplies won’t be able to meet“even a modest cyclical recovery in demand,” LaFemina wrote. Expects Freeport-McMoRanInc., First Quantum Minerals Ltd. and Glencore PLC tobenefit most from the copper price recovery. Freeport and First Quantum are histop picks. Also expects select iron ore miners such as AngloAmerican PLC, Vale SA and RioTinto PLC to outperform as prices are expected to remain high,peaking at more than $100 per ton in the near-term. The firm is“least bullish” on gold.

Goldman Sachs

“Copper is our mostbullish view,” for 2020, according to the commodity team. Copper demand inChina has been particularly restrained by “poor performance in the grid,property and transportation sectors” and that’s likely to change heading into2020. “We expect strong completion growth in the next two years, continuing apositive trend in the property sector since August,” and grid investment islikely to pick up strongly in the first quarter of 2020 thanks to thegovernment infrastructure stimulus. Meanwhile, the “strategic case for gold” isstill strong.

Citi

Most bullish onalumina, copper and coking coal in 2020, while bearish on zinc and iron ore.Thinks commodities will benefit from modestly higher global growth, with muchof the improvement coming from emerging markets. The commodities team is alsobullish on gold in the medium-term. The bank’s equity analyst upgraded TeckResources Ltd. to buy on better a coking coal outlook and valuation.

Morgan Stanley

The bank’s commoditiesteam expects a moderate rise in demand in 2020, driven by a “mini-cyclerecovery” through year-end. Remains constructive on the North American miningsector and particularly favors copper exposure. Sees Freeport-McMoRan and TeckResources as the best way to gain exposure to bullish copper sentiment.Commodities team is bearish on the aluminum and alumina outlook, but the equityanalysts still see some upside in 2020 for AlcoaCorp. The team also expects higher met coal prices as ex-China demandshould tighten the market. Bank’s top commodity picks are cobalt and copper,while the least preferred are iron ore, lithium and zinc.

Bank of America

Sees cyclical raw materialsbenefiting in 2020 from a potential inventory restocking cycle, easier Fedpolicy and an interim China trade deal, providing an attractive inflationhedge. Thinks that copper and nickel are likely to rally in 2020, while theoutlook for gold and precious metals is more cautious.

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