Goldman - on the other hand - says We believe that the miners' global growth relationship may be in the process of breaking down, owing to three key factors: (1) China's economy is maturing and its demand growth for commodities will slow; (2) many commodities are already in oversupply, and copper and iron ore could soon be too as growth capex continues; and (3) in oversupplied markets, cost reduction by producers could drive commodity price deflation. Sector unlikely to perform in short/mid term... We believe earnings drive valuation in the mining sector: with copper and iron ore set to move into oversupply in 2014/15E, we forecast sector earnings to decline, along with valuation. Second, with capex still high, there is little free cash flow to increase returns to shareholders and mitigate falling earnings. Lastly, post the recent rally, valuation is at the upper end of the sector's long-term range.
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