LME WEEK: Investors need to ‘buy what China didn’t buy’, BMO’s Robson says

The tactic over the past five years of investing in what China has been buying has reversed, as a lack of investment in the commodities China did not buy will push these prices higher, Tony Robson, md and co-head of global mining research at BMO Capital Markets, told Metal Bulletin.

The tactic over the past five years of investing in what China has been buying has reversed, as a lack of investment in the commodities China did not buy will push these prices higher, Tony Robson, md and co-head of global mining research at BMO Capital Markets, told Metal Bulletin.

“Over the past five years investors have been running with the thesis ‘buy what China buys and what they import’, which included coal, iron ore, copper and oil. This has led to high prices, which has encouraged capital investment in those commodities,” Robson said in an interview during LME Week.

“But that thesis is changing to ‘buy what China did not buy’, where we have seen low prices for the last five to ten years, meaning that they have had lower capital investment,” he said.

This lack of capital investment for commodities such as nickel and zinc has now meant that the supply outlook is much tighter, he said. This will lead to higher prices going forward, he added.

“Zinc has been an interesting metal where we are certainly seeing the end of life for the major mines that came on stream 10-20 years ago. This has been a commodity that has been starved of capital,” Robson said.

And on nickel, the emergence of Chinese pig nickel has depressed returns for nickel miners over the last five years, meaning there has been little investment in new nickel mine supply, he added.

Whereas for commodities such as copper, strong demand driven by the growth in China has led to overinvestment and oversupply.

“Copper is one of those commodities that had a lot of air play and a lot of capital. We do see a slight oversupply for the next three years on copper. But we agree with most of the major players that copper will end up in a structural deficit,” he added.

But overall, the outlook for most base metals is fairly strong, Robson said.

“Aluminium is up year-to-date and since late last year there have been stronger regional premiums. Zinc is looking good, and BMO is modestly optimistic on that. Nickel is potentially explosive in terms of its price, especially if we see stockpiled nickel ore being consumed by November from China,” he said, adding that lead as a by-product of zinc is also likely to benefit from the lack of investment in the sector.

But, in the short term, this stronger outlook will not help the mining sector outperform equity markets, he said.

“[They won’t outperform] this year or in the first half of next year. But bear markets in metals don’t last forever because of the lack of investment in the industry. A lot of the LME base metals are already looking interesting,” he said.

In terms of the top picks of mining companies, Robson advocated investing in the more stable and stronger companies such as Glencore, Rio Tinto and BHP Billiton. These companies have solid profit margins, growth, and a focus on sensible investments as well as returning capital to shareholders, he said.

And Boliden could be a good company to invest in to benefit from the bullish outlook for zinc. But the lack of investment in the metal means there are not many large companies that are pure zinc plays, he added.

“On zinc, as with nickel, because of the lack of investment for many years, it is hard for equity investors to get access to it in terms of listed mining companies,” Robson said.

Chloe Smith
chloe.smith@metalbulletin.com
Twitter: ChloeSmith_MB

What to read next
US copper scrap market participants are shifting from COMEX to LME pricing in response to extreme price volatility and a new 50% copper import tariff. The change is influencing discount formulas, export strategies and long-term trading dynamics across the sector.
The proposal follows preliminary discussions with the market and internal analysis of price usage, which suggests low market liquidity and a lack of demand. Specifically, Fastmarkets is proposing to discontinue: MB-CU-0410 Copper rod premium, ddp Midwest US, US cents/lbQuality: Purity of 99.95-99.99%. Thicknesses of 8 millimeters or 0.3125 inchesQuantity: Min 25,000 poundsLocation: Delivered US MidwestUnit: US […]
After a month-long consultation period, Fastmarkets is amending the below specifications, following no negative feedback from market participants and internal data analysis. The following changes will take place: The new specifications are as follows, with amendments in italics: MB-CU-0002 Copper grade 1 cathode premium, ddp Midwest US, US cents/lb Quality: Grade A 99.9935% min copper cathode conforming to LME […]
The global copper market has finally received the widely anticipated news that imports to the US will be tariffed from August 1. The finer details of the tariffs, including their scope, and whether key copper-exporting nations like Chile, Canada and Peru will be exempt, remain unclear.
LME copper prices took a significant hit following US President Donald Trump's announcement of a potential 50% tariff on copper imports. The uncertainty surrounding the timeline and implementation of the tariff has left market participants hesitant, with analysts noting its immediate impact on price momentum and trading activity.
Fastmarkets has launched MB-AL-0424 Aluminium P1020A premium, fob Indonesia, $/tonne on July 9 due to an expected increase in Indonesia-origin aluminium exports. MB-AL-0424 Aluminium P1020A premium, fob Indonesia, $/tonneQuality: P1020A or 99.7 % Minimum Al purity (Si 0.10% max, Fe 0.20% max) in line with LME specifications. Ingot, T-bar, sowQuantity: Min 500 tonnesLocation: FOB IndonesiaTiming: […]