Copper and rare earth metals are “well supported” by supply disruptions as well as demand in emerging markets and may advance to records, Ian Henderson of JPMorgan Chase & Co. said.
Copper is down 13 percent from a record $10,190 a metric ton in February and has dropped almost 10 percent in the past two weeks on the London Metal Exchange after Standard & Poor’s downgraded U.S. debt for the first time, riots swept across England and Europe’s debt crisis deepened. Copper demand will exceed supply this year, Barclays Capital forecasts.
“Copper is well supported by fundamentals,” Henderson, who manages $9 billion of natural resources assets at JPMorgan Chase in London, said in an interview yesterday. “In view of the fact that over 55 percent of all the world’s metals are now consumed in the emerging world, which is still growing, and you’ve got strikes, and weather interruptions, we think prices are well-supported and may well see new all-time highs.”
The Standard & Poor’s GSCI Index of 24 raw materials, up 2.6 percent this year, fell 5.5 percent in the last two weeks with nickel, zinc, crude oil and copper lower. Gold in London gained 7.3 percent in the period, rising to a record $1,814.95 an ounce.
The Bloomberg World Mining index of 130 stocks, down 15 percent this year, slipped 10 percent in the past two weeks, led by declines in China Molybdenum Co., Kazakhmys Plc and United Co. Rusal. At the same time, AngloGold Ashanti Ltd. surged 14 percent.
“Now is a very good time to buy” mining shares, Henderson said. “People have to regard volatility as something we have to live with.”
Rio Tinto Group, Fortescue Metals Group Ltd. (FMG), African Minerals Ltd. (AMI) and First Quantum Minerals Ltd. (FM) are top picks, he said. Glencore International Plc “will do reasonably well” from a long-term perspective, while it’s “slightly more expensive” than other stocks, Henderson said. Glencore shares dropped 14 percent in the past two weeks.
“When things recover, I think that the commodities sector will once again be a leading, if not the leading, sector from an investment perspective,” Henderson said.
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