Chinese demand for commodities will carry miners, says Jefferies

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A recovery in Chinese demand for commodities could help mining companies weather a slump in the United States and Europe, Jefferies analysts said. A key question will be how well China’s stimulus measures support the price of industrial metals such as copper.

“We are cautiously optimistic about a gradual recovery in Chinese demand, but there is not enough evidence to have strong conviction from this view,” said Christopher LaFemina, analyst at Jefferies, in a report. September 21. “We expect the picture to become clearer over the next few months.”

Key developments to watch include the Chinese Community Party’s National Congress from Oct. 16-22, the twice-a-decade gathering to select party leadership and set strategic goals for at least the next five years.

Investors are also looking for any changes to China’s pandemic restrictions. The country’s border closures and controls this year have been blamed for stunting economic growth.

“We expect commodity prices to bottom in 4Q and remain relatively low in 1H23, with a half-weighted recovery next year,” according to Jefferies. “Mining shares are likely to temporarily decline in the near term, but we would use dollar cost averaging on this weakness.”

Rio Tinto Group (RIO), BHP Group (BHP) and Glencore (OTCPK:GLCNF) are “the best at the moment”, while Freeport-McMoRan (FCX), First Quantum (FM:CA) Alcoa (AA) are ” the best so far.” long-term,” the report said.

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