Paul Robinson: Watch These 2 Commodities Trends in 2018

TL;DR

The mining sector is optimistic with solid demand and supply foundations forming, driven by growth across the world and environmental closures in China. Emerging trends include increased demand for electric vehicles and China's focus on environmental policies.

Transcript

I'm Charlotte McLeod with the investing news network and here today with me is Paul Robinson director at GRU group thanks for joining me today it's good to be here as always okay well thanks for coming we're here at PDAC on the second day of the conference have you had a chance to get a sense of the mood so the mood is definitely optimistic if I go... Read More

Key Insights

• 🫤 The mining sector is more optimistic compared to a year ago, with solid foundations of demand and supply.
• 🙈 Environmental closures in China have had unexpected effects on steel, iron ore, and bulk commodity prices.
• 🚙 Emerging trends include increased demand for electric vehicles and China's focus on environmental policies.
• ❓ M&A activity in the mining sector is expected to restart, but cautiously, with opportunistic acquisitions and brownfield expansions.
• ⏳ Investors should consider base metals and steel over bulk commodities, and prioritize high-quality, low-impact commodities over polluting ones.
• 💗 The premiums for high-quality commodities are expected to grow in the coming years.
• 🏈 The recent tariffs on aluminum and steel may not have the desired impact and could burden the North American market.

Questions & Answers

Q: What were the resource trends in 2017?

In 2017, there was a strong pick up in demand globally, leading to higher prices in base metals. Environmental closures in China also restricted capacity and increased prices for steel and iron ore.

Q: What were the surprises in terms of supply?

The positive surprise was the world's strong growth and demand for resources. However, the scale of the price lift was underestimated due to the scale and demand in China. The surprise was China's commitment to tackling pollution levels, which positively impacts the steel and raw material sectors.

Q: What new trends should we expect?

Two new trends to watch are the increasing demand for electric vehicles, affecting various commodities, and China's focus on the environment, potentially extending steel cuts and supporting steel and metal prices.

Q: What are the thoughts on the recent tariffs announced?

The tariffs on aluminum and steel by the Trump administration may not achieve the desired results. China is a small importer of steel products to the US, and aluminum was already returning due to demand growth. These tariffs may end up burdening the North American aluminum market, affecting consumers and mining companies.

Summary & Key Takeaways

• The mining sector is experiencing an optimistic mood at the PDAC conference, with solid demand and supply foundations forming.

• In 2017, there was a stronger-than-expected pick up in demand across the world, leading to price increases in base metals and steel due to growth in Europe, the US, China, and Southeast Asia.

• Unexpected environmental closures in China drove capacity restrictions in bulk commodities, steel, and iron ore, further lifting prices.