'From crisis to crisis, the melt-up continues,' Jefferies says on commodities

Freeport Resources

02/03/2022 14:15

** According to Jefferies, Russia's invasion of Ukraine "has
added fuel to the fire of roaring commodity markets" and could
lead to serious supply shocks
    ** The brokerage sees palladium, platinum, diamonds and coal
as most impacted by the crisis while nickel, aluminium, copper,
zinc and iron ore supply are also at risk
    ** "Even before this crisis, markets were tight ... Now we
have the added impact of higher energy prices, which raises and
steepens cost curves in mining," it adds
    ** Jefferies notes the demand impact of a collapsing Russian
economy and the outside chance that "this escalates into
something much uglier" must be considered as well
    ** "We just believe it is dangerous to assume there will not
be an impact on demand, even if the slowdown in question
reverses relatively quickly," it says
    ** Although a temporary demand slowdown could pause their
rally, the brokerage sees miners outperforming the broader
equity markets in the near term and the next decade
    ** Jefferies is more bullish in the long term, but
recognises the risk of "an air pocket of demand weakness" as the
economic fallout from the war unfolds
    ** Its top picks are Glencore  GLEN.L , Freeport  FRI.V ,
First Quantum  FM.TO , Alcoa  AA.N , Anglo  AAL.L , Rio  RIO.L ,
BHP  BHP.AX , Vale  VALE3.SA  and South32  S32.AX 

 (Reporting by Juliette Portala)
 ((juliette.portala@tr.com))