As 2022 looks to be this bull market’s peak for earnings and dividends, opinions are split about what comes next for major miners
It goes without saying that commodity cycles are tricky to time right. Even picking an indicator is tough – does a dip in copper or iron ore prices mean the worm has turned, or do low inventories in Chinese ports mean sales at Rio Tinto (RIO) and BHP (BHP) will be protected? These are blue-chip companies that will likely be buy-and-hold shares for most investors, but being clear on what is coming next is important.
The pressures on these companies are clear: rising costs and an uncertain macroeconomic landscape. And uncertainty here does mean a lack of clarity on the near-term future rather than just another way to describe a negative sentiment. China has remained committed to keeping Covid-19 cases low, with lockdowns still a fact of life for many people in the country. There were whispers of a step down in the harsh pandemic policies earlier this month, but so far it looks as though these will continue.
For the miners, this means lower demand from China, the key global industrial metals buyer. Rio and BHP are the most exposed, given their reliance on iron ore, while Anglo American (AAL) and Glencore (GLEN) have more varied portfolios, with proportionally more copper as well as other base metals like zinc and lead, Investors Chronicle writes.