Crispin Murray, Head of Equities at BTIM, gives a clear and non-alarming perspective on recent iron + copper price movements

Crispin Murray, Head of Equities at BTIM, gives a clear and non-alarming perspective on recent iron + copper price movements. As many people are aware, credit has been used to purchase substantial inventories of copper and iron. Credit is now tightening there is a flow on effect resulting in a sell down of these inventories. The result is the well publicised fall in related commodity prices. Murray estimates the over supply equates to about 20-30 million tonnes or effectively a few weeks of supply. He expects this sell down process to play out quite quickly and iron prices to stabilise in the $110-$120 range. From an equities perspective, Murray says high cost producers will still get squeezed as prices soften. He is underweight resources, however, Murray does likes select exposures to low cost producers that are ex capital expenditure. Oil Search and RIO are his sector picks.