This year has been a let down for the Mining Sector unfortunately . A key reason for that is China. E.g difficult times there including for their heavily indebted Property Sector and generally disappointing economic performance which feeds through to lower demand there for commodity shares, along with the much slower recovery after the end of their draconian lockdowns than was expected. . I.e China is a key market. Hence falls in key commodity prices like iron ore and copper. Which means falling sector share prices and dividend cuts too.
BUT there could well be a big long and sustained Mining sector bull market in 2024 longer. There were big Mining sector gains on Friday …but that hasn’t continued today. Might be yet another 2023 short term bounce, or could be the start of the long promised multi year Mining bull market?
WHY that bull market ahead? Some of the following is based on a MoneyWeek article several months ago, which concluded …not yet but in 2024.
Reasons to be bullish:-
1. Mining sector debt is at historic lows and at lows compared with other sectors.
2. There has been a decade of underinvestment in to new metal supply. So supply shortages and rising commodity prices ahead.
3. Inventories for copper are now at relatively low levels. So recent oversupply because of that temporary lower demand will likely reverse.
4. Metals are ESSENTIAL for renewable energy.
5. Global demand for copper, nickel, cobalt and lithium likely to rise dramatically along with masses of iron ore going to be needed just for wind turbines for starters.
That underinvestment in new mining projects could well see demand far outstripping supply with much higher core commodity prices ahead as a result.
6. Mining sector trading at around 5 times cash flow. That’s the lowest for many years apparently.
And past Mining bull markets have seen huge share price gains. I’ve held some of the big Mining shares and Investment Trusts since towards the end of the exceptionally long and severe Mining sector bear market that culminated in extraordinarily low share prices at the start of 2016. e.g Anglo American (LON:AAL) fell to just £2.20 compared with £22.74 That extreme Mining bear market was while Markets generally were otherwise steady. It turned out…
