Our thesis for the miners being supported by MtM upside and ongoing efficiency has been bolstered by the China due diligence trip and the potential infrastructure spend from the US. Conditions are constructive; we favour bulk miners, and some gold exposure.
China feedback suggests no abrupt decline: The China and European Materials teams’ recent due diligence trip suggested steel consumption could hold, with high met coal prices necessitating the use of higher quality iron ore (+1-2% higher). Domestic iron ore supply will likely be slow to respond given the US$60/t op cost plus capex. And while there is a coal supply response underway after the NDRC’s relaxation of mining restrictions ithas not affected price yet due to IPP restocking.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
