Some Investors Say Stocks Have Fallen Too Far, and News Isn’t All Bad
LONDON—Mining stocks are among the worst performers this year, with those exposed to iron ore down sharply amid concerns about overcapacity and sluggish demand from China. But some investors believe the rout could be overdone, with share prices of miners falling much further than market prices for iron ore.
“Right now, we’re moving into the low and everyone’s twitchy; the market’s focused on the third quarter, when we’ll have shutdowns in the Chinese steel industry and a seasonal downwards [move],” said Clive Burstow, manager of Barings’ Global Mining Fund, which holds some $15 million in mining stocks.
Capacity to produce iron ore is set to boom in the next few years as expansion programs planned before the financial crisis start to come on stream. By 2018 there will be an extra 419 million tons of capacity, according to estimates compiled from producers’ data, around 40% above 2012’s seaborne traded levels of just over one billion tons.
About half of the new capacity is expected to come on stream by late 2015, including from new projects by Rio Tinto RIO.LN +0.17% PLC and BHP Billiton PLC in Australia, and from Vale SA VALE5.BR -0.31% in Brazil. Continue Reading →