Goldman Says ‘Worst Is Over,’ Recommends BHP Billiton View...

Goldman Says ‘Worst Is Over,’ Recommends BHP Billiton

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May 26 (Bloomberg) -- The “worst is over” for raw materials demand and investors should increase investment in companies including BHP Billiton Ltd. and Newcrest Mining Ltd., according to Goldman Sachs JBWere Pty.

“We are becoming increasingly confident that the period of weakest demand for raw materials is behind us,” analysts led by Melbourne-based Malcolm Southwood said yesterday in a report. “We have also seen the bottom of the price cycle for base metals, and particularly for copper, which remains the most supply-constrained, and therefore our preferred commodity for investment exposure.”

Rio Tinto Group, the third-largest mining company, is hopeful of a “V-shape” recovery in China, the world’s biggest metals buyer, an executive said today. The Asian nation increased imports of copper, aluminum and iron ore to a record in April as buyers replenished stockpiles for the country’s 4 trillion yuan ($586 billion) stimulus.

“The rate of copper and iron ore imports into China has been extraordinary and certainly implies a degree of restocking,” Goldman’s Southwood said. “The bottom line here is that we think economic sentiment, demand for raw materials, and commodities prices will be better in 12 months’ time and 24 months’ time than they are now.”

BHP rose 0.4 percent to A$33.99 at 11:07 a.m. Sydney time on the Australian stock exchange. Newcrest, Australia’s biggest gold producer, advanced 2.6 percent to A$32.20. Goldman has “buy” recommendations on BHP, the world’s largest mining company, and Newcrest, it said in the report.

Copper Supply

Copper futures in London jumped 52 percent this year as demand for pipes and wires rebounded and China boosted imports. New supplies probably won’t meet the estimated additional 4 million metric tons of demand by 2013, analysts at Macquarie Group Ltd. led by Jim Lennon said today in an e-mailed report.

“What is unshakeable is our belief that China and India and the other emerging economies will be the key engines of any return to world growth and commodity demand growth,” Rio Tinto’s head of iron ore Sam Walsh said at a resources industry presentation in Canberra today. London-based Rio is the world’s second-largest exporter of iron ore.

Chinese imports of iron ore and coal will increase by more than previously forecast this year and the nation is now setting a floor for prices, Goldman said in the report.

Australia’s economy will benefit from positive signs on exports to China, its biggest trading partner, and other developing nations, Treasurer Wayne Swan said today.

Goldman also has “buy” ratings on Equinox Minerals Ltd., PanAust Ltd., Felix Resources Ltd., Whitehaven Coal Ltd., Lihir Gold Ltd., Sino Gold Mining Ltd. and Dominion Mining Ltd, the report said.

To contact the reporter on this story: Jesse Riseborough in Melbourne at [email protected]

Last Updated: May 25, 2009 21:58 EDT