A rebound in demand for metals in 2020 should boost the mining sector, Deutsche Bank said as it rejigged its forecasts and target prices for giants Anglo American plc (LON:AAL), Glencore PLC (LON:GLEN), BHP Group (LON:BHP) and Rio Tinto plc (LON:RIO).
Following an extended period of destocking through the past 18 months, there should be a more supportive global environment, the German bank said in a note to clients on Thursday.
Seasonal trends are also expected to remain supportive through the first quarter and valuations “remain undemanding”.
Deutsche analysts view copper as the “best positioned metal” as a year of sluggish end demand is being followed by a recovery in demand against a backdrop of low inventories and tight mine supply.
Aluminium and zinc are expected to remain range bound as supply increases this year, while iron ore prices “should remain supported” in the first half due to a heavily destocked supply chain before a fade is anticipated towards $70 from midsummer as supply rebounds and demand slows.
Anglo and Glencore remain ‘buy’ rated and the analysts top picks, with the former offering a “compelling medium term growth and re-rating story”, while Glencore has been the laggard for two years in a row and was given a slightly higher target price of 275p, up from 270p.
Analysts do not expect an extension of the buybacks at either company, though Anglo expected to top up the ordinary dividend in 2019 via either a buyback or special dividends, as it enjoys low leverage but is looking to buy Sirius Minerals (LON:SXX).
Ratings for Rio and BHP were kept at ‘hold’ as their valuations are seen as being close to fair value.
For BHP though, the arrival of new CEO Mike Henry means “the evolution of BHP's strategy will be an interesting focus area through 2020” as he overseas a large pipeline of unsanctioned and often higher risk projects across petroleum, potash and copper.