Material Matters: Previews Quarterly Updates

Commodities | Jan 15 2020

A glance through the latest expert views and predictions about commodities producers' upcoming quarterly production reports. Featuring are bulks; copper; aluminium/alumina; nickel; and gold.

-Bulk commodities production expected to be strong in the December quarter
-While bullish on copper in 2020, Goldman Sachs is negative on Oz copper stocks
-Balanced nickel market in 2020 expected to give way to a deficit in 2021

By Eva Brocklehurst

Bulks

Goldman Sachs is forecasting strong steel demand in China, along with another deficit in iron ore in 2020. The broker maintains a Buy rating for both BHP Group ((BHP)) and Rio Tinto ((RIO)), but prefers BHP Group for its oil, coking coal and copper exposure.

UBS expects BHP Group to deliver a sequentially stronger quarter in December, marking the first production update for the new CEO, Mike Henry.

BHP Group is due to report its December production on January 21. Rio Tinto is expected to hit its 2019 guidance targets but suspects mineral sands may be a risk because of the closure of Richards Bay. Rio Tinto will report its December production results on January 17.

The December quarter is generally a strong quarter for bulk commodities, as the companies tend to push up volumes ahead of seasonal weakness from weather events in the March ?quarter.?

?UBS assesses there is a risk for price realisation for Fortescue Metals ((FMG)), given discounts have blown out almost -25%. Yet the pay-out ratio has been lifted to 80% from 60% because of strong free cash flow in the absence of other opportunities.

Goldman Sachs retains a Neutral setting on Fortescue Metals, noting capital management for all three iron ore majors could be to be a positive catalyst stemming from the reporting season in February.


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