The performance of Australia’s mining stocks is lagging their global peers by the the most in over a year, as China’s uneven recovery and volatile metal prices weigh on shares.
Recent rallies in gold and copper prices have done little to lift the S&P/ASX 200 Materials Index, down 6.6% for the year, due largely to share declines in behemoths BHP Group Ltd and Rio Tinto Ltd, which account for over half the gauge. In contrast, the Bloomberg World Mining Index is up almost 7%.
Miner shares have trailed falling iron ore prices, which have sunk by 17% this year as China’s real estate slump continues to damp steel demand. Both Rio Tinto and BHP get more than half of their revenue from China.
Still, there might be some positives for miners: ore prices are rebounding after dipping below $100 a ton, and quarterly production updates from BHP and Rio Tinto cast copper as a bright spot for both miners. SBG Securities analyst Tim Clark raised the recommendation on BHP to buy from hold following its trading update.
“We do expect the demand outlook out of China to stabilize into mid-year and be supportive of early-stage commodities, such as iron ore, coal,” UBS analysts including Lachlan Shaw wrote in an April 9 note.
Prolonged US dollar strength may also benefit Aussie miners’ profits as their US dollar-denominated export incomes gain from favorable exchange rates.
(By Georgina McKay)
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