Analysts at the heavyweight US investment bank, who upped their price target to 4,950p (from 4,850p) as well, also argued that demand from China, the world’s largest consumer of raw materials, is set to rise once again in the coming months.
“Commodities Research estimate China’s infrastructure boost could result in ~1.3Mt of new copper demand in H2,” read a note to clients on Monday.
“We expect robust iron ore demand as China steel output accelerates from trough in Q4, which may be amplified by capacity shutdowns from Nov-Mar that incentivise steel producers to re-stock premium seaborne iron ore.”
The JP Morgan number crunchers added that UK miners are trading at “depressed mid-cycle or recession multiples”, despite seemingly being on an upswing.
“We believe we are ~80% through this cycle, a phase that historically shows commodity price inflation.
“Mining equities are cheap vs multiples at comparable phases of previous economic cycles and would trade close to mid-cycle multiples even if current commodity prices fell -10%, indicative of valuation support.”
Despite the general optimism, JP Morgan downgraded Glencore PLC (LON:GLEN) to ‘neutral’ from ‘overweight’ as US officials look into allegations that some of its subsidiaries bribed government officials to win or retain business.