Favourable Commodity Price Movement – What this means for Key ASX Stocks?


With improvement in global economy, the commodity prices are again moving on a favourable trend. The resource landscape is gathering more traction as investors are running away from some weakness in the banking sector with interest rates’ hikes taking a centre-stage at the global front.

Amidst this scenario, copper stocks are coming into limelight with copper price being driven by higher imports to China (13% up from December 2017 to 314,525 tonnes in January 2018) and strong economic data projecting a robust demand scenario. It is worth noting that benchmark three-month copper on the London Metal Exchange closed 0.2% up at $US7110 a tonne, which is close to the recent four-year high of $US7312.50. Similarly, nickel imports had doubled to 26,691 tonnes at the back of need of the metal in steel industry and rise in Chinese steel futures. Overall, riskier assets are being preferred with the equity markets’ resurrection across the globe.

Given the encouraging commodity scenario, iron ore joined the bandwagon and rallied to a 10-month high on the possibility of extension of steel supply curbs in China beyond winter. The spot price for benchmark 62% content ore moved up 1.1% to $79.65 a ton as on February 26, 2018. This seem to have benefitted iron ore players including RIO Tinto Ltd (up 1.3%) and BHP Billiton Ltd (up 0.8%) on February 27, 2018.

It will be crucial to see whether this rally runs out of steam with China changing its focus to services from heavy industrial sectors. While it will be crucial to see the developments, the investors can punt on resources stocks with strong fundamentals.


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