Red Kite’s Jansen Favors Tin as ‘Super-Cycle’ Continues
Tin is the top pick among base metals for 2013, while platinum and palladium will outperform gold and silver in the next few years, said Michael Jansen, head of research at RK Capital Management LLP.
“Mine supply is expanding solidly in all LME base metals except for tin,” said Jansen, whose company, known as Red Kite, oversees $3 billion in assets. Precious metals will outshine industrial metals, he said.
The Standard & Poor’s GSCI gauge of 24 raw materials more than doubled in the past decade, as gold had the longest string of annual advances since at least 1920. Red Kite joins Goldman Sachs Group Inc. and Morgan Stanley in forecasting a commodity “super cycle” will continue, while Citigroup Inc. analysts said in November it ended because China is growing more slowly and supply has caught up.
“I don’t think it’s over,” Jansen said in an interview in Shanghai on Jan. 13. “It’s just not as exciting as it was.”
The hedge fund, co-founded by Michael Farmer and David Lilley in 2005, runs Red Kite Compass Fund, Red Kite Metals Fund, Red Kite Prospect Fund and two mining-finance funds. It invests in both precious and base metals, Jansen said.
Tin, the best performer last year among six industrial metals traded on the London Metal Exchange, gaining 22 percent, climbed to an 11-month high of $25,100 a metric ton yesterday. Copper gained 4.4 percent last year and traded at $7,982 a ton at 4:23 p.m. in Shanghai. The metal is in a moderate uptrend, although it will fall back “quite quickly” this year, he said.
“Supply growth is expected to be quite strong this year, and that will meet most of the demand, if not all of the demand improvement,” he said, referring to copper.
The company is bearish about aluminum and lead because China is largely self-sufficient, and nickel because the country is importing less, Jansen said. China, the largest user of industrial metals, accounting for more than 40 percent global consumption, is also the biggest producer refined metals.
China’s gross domestic product expanded 7.4 percent in the third quarter of 2012 from a year earlier, the slowest since the first quarter of 2009. Data released on Jan. 11 showed consumer prices gained more than expected in December, limiting the room for easing, and a report to be released on Jan. 18 may show fourth-quarter GDP accelerated to 7.8 percent, according to a Bloomberg News survey.
“I’m not really worried about China,” said Jansen. “China’s growth is enough to feed through quite strong demand increase for individual metals.” Physical consumption in the U.S., the second-largest user of industrial metals, is also expected to improve this year, he added.
“It’s still bullish in the sense that demand stays strong, but we’re in the short-term period where supply is quite strong,” Jansen said. “In a few years, I can see it being very different again.”
The S&P Goldman Sachs Commodity Index gained 0.3 percent last year, the smallest annual gain since 2008, when it tumbled 43 percent. A sub-index of base metals added 0.2 percent in 2012, while that of precious metals rose 2.4 percent.
“We don’t think base metals are going to go up much this year,” Jansen said. “We’re more bullish on precious metals, particularly platinum and palladium.”
If central banks start to unwind unconventional easing policies, it will be less bullish for precious metals, while industrial demand, led by record automobile sales this year and supply disruptions, will support platinum and palladium, according to Jansen.
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