Most of the 38 commodities CRU Group tracks are expected to register annualized year-on-year price increases in 2021.
COVID-19 introduced a lot of uncertainty last year, but the commodities sector ultimately rebounded in the second half, setting the stage for a bright 2021 outlook.
Speaking to the Investing News Network, Paul Robinson, director of CRU Group, said that this year 35 out of the 38 commodities his firm tracks are expected to register annualized year-on-year price increases.
That’s a significant change from 2020, when 31 out of the 38 commodities covered by CRU Group registered annualized year-on-year price declines compared to the previous period.
“What I would say is across the board we’re seeing price appreciation for the commodities space,” he explained. “And importantly, for most of them that price appreciation remains behind cost appreciation. So again it’s another good year for margins (and) another good year for free cash flow if your exposure is via equity or debt rather than the commodities themselves.”
But which commodities does CRU Group expect to perform the best this year?
“We still see strength in specifically US steel prices and US aluminum prices, and that’s around the restrictions on trade in and out of the US for competitive products,” he added.
Precious metals are expected to do relatively well too, although gold is no longer at the top of the pile like it was a year ago. More carbon-intense commodities like metallurgical coal are at the bottom.
Aside from the outlook for commodities, Robinson spoke about the broader interest the mining industry has recently attracted, saying that companies will have to work hard to retain this attention.
“As an industry we’ve attracted a lot of interest, a lot of capital and a lot of funding over the last 12 to 15 months. The industry has performed really well, and it’s shown that capital discipline actually helps in terms of bringing out interest and making decent returns for its investors,” he said.
“I think there’s a challenge and an opportunity, which is how do we now retain this wider pool of interest in our sector? What do we need to do to ensure that we remain a sector which is investable and a sector that can grow, and can help with the carbon and energy transition challenges that we face as a world? Let’s not slip back into old habits once the economy recovers.”
Watch the interview above for more from Robinson on the resource sector in 2021.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.