Neil Gregson, manager of the JPM Natural Resources Fund said the ‘dislocation and despair’ within the sector has lead to seeds being sown for a cyclical upturn in the near future.
“It has been a painful period for the industry and completely understandable why many investors have simply given up,” Gregson said.
Investors with this mind-set should think again however according to Gregson because the supply side has been heavily restricted and demand is starting to rebound, meaning higher prices are on the cards.
“Industry exploration expenditure has been slashed and Greenfield projects put on hold, new management teams at the major mining companies will remain wary of a shareholder reaction should they revert back to a strategy of ‘growth for growth sake,” Gregson explained.
Gregson added that slowing growth in China should not hit demand too hard as any growth is from a much higher base than before. “We are at an inflection point in certain commodities where after many years of supply outstripping demand, the reverse is starting to unfold and will mean recovering commodity prices and improved margins for commodity producers,” he said.
