Metals & Mining

Entering 2024, investor expectations of a more accommodative policy through reduced Fed Fund rates beginning in Q1 2024, the potential of a softer, but growing economic activity, positive lagged impact on Chinese credit easing and stimulus post Chinese New Year could allow a more sustainable recovery among metals and drive positive equity performance. Lower interest rates, the realization of the expected Fed policy pivot, increased annual US deficits that currently exceed $2 trillion and improved global growth would likely pressure the US Dollar relative to emerging and developed economies providing tailwinds for mining shares. While metal demand trends faced inventory, funding and slower than anticipated global industrial activity, looming structural supply deficits still need to be addressed through improved miner confidence, accelerated capital spending and importantly, higher posted prices that send visible and loud signals for miners to drive added supplies to the market. As potential for improved cyclical demand during 2024-2025, continued policy and private sector desires to aggressively de-carbonize supply chains, transportation and power markets combined with structural barriers that we believe will limit efficient and timely delivery of added supplies should support improved market prices. Global miner valuation should better reflect the prospects of cyclical global economic growth, the less restrictive US and Global monetary policies, supplies continuing to lag demand expectations and the dollar trending below current levels. Climate policies, regulatory hurdles to maintain or expand production, local regional protests limiting mining activity, higher seaborne transport and contractor cost inflation offer upside risks to metals and bulks. We expect pricing recovery among non-ferrous metals, firm and improving gold prices, supply tightness driving met coal price recovery and stabilized export thermal coal pricing. We offer a 2024 average copper price forecast of $4.10 per pound and aluminum at $1.05 per pound. We have raised our average 2023 gold target to $2,050 from $1,950 to reflect continued Central bank demand, investor interest as geopolitical and sticky long-term inflation expectations drive investment with upside potential from accelerated marginal US dollar diversification among global trading partners.