BUZZ-MS sees seasonal restock to bring metals & mining back into focus
Morgan Stanley highlights a seasonal restock that may refocus attention on the metals and mining sector, despite disappointing steel demand in China. The firm anticipates a modest uptick in activity through year-end but notes limited demand inflection without significant stimulus. Key mining stocks like Endeavour Mining and Rio Tinto are rated "overweight," while Antofagasta is downgraded to "underweight" due to production risks and high capital expenditures. Overall, the brokerage maintains a cautious outlook on the sector amid pricing challenges.
As China’s steel demand indicators disappoint, Morgan Stanley says a seasonal restock would bring the metals & mining sector back into focus
Says, prospects of a meaningful demand inflection in China remain limited in the absence of more decisive stimulus, but sees a modest and seasonal pick-up in activity through year-end
Steel-making raw materials like iron ore and metallurgical coal are trading into the cost curve, limiting prospects of a sustained price decline from current levels, the broker says
Mining equities are pricing further price declines, which MS sees as unsustainable
The brokerage’s most preferred mining companies are Endeavour Mining (EDV.L) , KGHM (KGH.WA) , Metlen (MYTr.AT) , Norsk Hydro (NHY.OL) , Rio Tinto (RIO.L) (all “overweight”-rated)
MS keeps “neutral” on Aurubis (NAFG.DE) , Befesa (BFSA.DE) , First Quantum Minerals (FM.TO) , Fresnillo (FRES.L) , and Glencore (GLEN.L)
It downgrades London-listed Chilean miner Antofagasta (ANTO.L) to “underweight” from “equal weight” citing production risks, a heavy capex cycle and a stretched implied copper price
The broker’s least preferred stocks in the sector (“underweight”-rated) are Antofagasta and Boliden (BOL.ST) , the latter still challenged on operational/project setbacks and unfavourable smelting exposure
