SINGAPORE, May 28 (Reuters) – There appears to be an outbreak of “cautious optimism” in the Asian commodities sector.
It was easy to lose track of the number of times the phrase popped up in presentations and conversations at four major commodities conferences in the region in the past two weeks.
However, defining what people meant by being cautiously optimistic was somewhat more challenging, although the common thread was a view that the worst is over for commodity prices, and the sector is once again worth looking at from an investment perspective.
Of course, it’s easy to dismiss participants at the SGX Iron Ore Forum and the Asia Mining Congress in Singapore, the Asia Oil & Gas Conference in Kuala Lumpur and the LME Week Asia in Hong Kong as talking their books, or at least to their hopes.
But what will be key is how the expectations of better times ahead translates into action. From a pricing perspective, there was widespread acknowledgement that the likelihood of strong rallies was very low, rather what producers, traders, buyers and investors are forecasting is a gradual grind higher as rising demand eats away the supply overhang created by over-investment in mines.
Where the cautious optimism was most evident was in the investment community, attending the Asia Mining Congress this week in Singapore.
With the sharp declines in the prices of many commodities, such as iron ore, coal and oil since the highs of 2011, it became virtually impossible to fund junior exploration and production companies.
The ASX 300 Metals & Mining Index, where the majority of small explorers are listed and try to raise capital, has dropped 49 percent since the high reached in April 2011.
The S&P/TSX Venture Composite Index serves much the same purpose for small explorers in Canada, and it has declined 71 percent since March 2011.
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