By Robb M. Stewart
MELBOURNE--China's appetite for commodities continues to grow
and, with the steady recovery in the U.S. economy, should support
prices for raw materials such as iron ore and copper, portfolio
managers for BlackRock Inc.'s (BLK) natural resources equity team
said Tuesday.
Catherine Raw, co-manager of BlackRock's BGF World Mining Fund,
told reporters in Australia that slower growth in China's economy
still translates into strong commodities demand but that this
hasn't been reflected in share prices for the mining industry. At
the same time, the euro zone crisis is currently less of a concern,
and the U.S. economy has performed better than some people had
expected early in the year, she said.
"We still see share prices predicting a very pessimistic
outlook," Ms. Raw said during a conference call.
Ms. Raw said the copper industry continues to struggle with
declining ore grades and bringing enough production into the market
to meet expected demand, which will support the price of the metal.
Similarly, a big jump in output of iron ore that is planned by
mining companies will take longer to develop and cost more, with a
number of companies having delayed or cancelled developments this
year after a slump in the price of the steel-making raw ingredient,
she said.
However, she said the BlackRock-managed investment portfolio of
Australia-listed Global Mining Investments Ltd. (GMI.AU), had moved
to an underweight position on platinum this year based on
increasing concerns over operating conditions in South Africa, the
world's biggest producer of the metal.
GMI's portfolio underperformed its benchmark in the three months
through September, returning 3% against a 6% rise in the HSBC
Global Mining Index, largely because of an overweight position in
iron ore producers in a period when the price of the commodity fell
sharply.
Prices for iron ore fell sharply as Chinese steel mills worked
through stockpiles and slowed output, with the spot price dropping
by about one third in just two months to as low as US$86.70 a
metric ton in early September before staging a recovery back above
US$100 a ton.
Ms. Raw said iron ore appeared to be well supported at about
US$120 a ton, roughly where the spot market price was trading this
week.
Write to Robb M. Stewart at robb.stewart@wsj.com
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