Once Bullish, Miners Turn Bearish on Metals Prices – by Alex MacDonald (Wall Street Journal – May 26, 2016)


Sector wrestles with overcapacity that built up during the decade-long commodity boom

The rally in the price of metals is over and few see it coming back soon, including the miners themselves.

Copper, iron ore and other metals and resources rallied through much of this year, but this month headed lower once more. Those declines will continue, given uncertainty over Chinese growth, the oversupply in many metals and resources, and a strengthening U.S. dollar, mining executives say.

That will put further pressure on the share prices of miners, which rebounded with metals. Analysts are also bearish, but the negative call from once bullish miners underscores just how poor sentiment is in metals markets, even after five years of declines.

“Although we have recently seen some positive signals…we are expecting another year or two of low copper prices,” said Jean-Paul Luksic, chairman of Chilean copper producer Antofagasta PLC, last week. Other senior executives from the world’s largest miners have a similar message on their metals and iron ore.

From lows hit as early as January to May, copper gained 17%, nickel rose 25%, and iron ore, a key ingredient in steelmaking, shot up 75% to $68.70 a metric ton.

These rallies were fueled by a belief that China would buttress wobbling economic growth with stimulus measures, creating demand for metals and iron ore while also encouraging Chinese retail investors to jump in.

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