Natural Resources Indicator – where next for commodities?

From oil to gold and rice to renewables, the pandemic has hit almost every natural resource-related sector. Ninety One’s Natural Resources team assess the risks, opportunities and outlook for investors.

Apr 30, 2020

18 minutes

From oil to gold and rice to renewables, the pandemic has hit almost every natural resource-related sector. Ninety One’s Natural Resources team assess the risks, opportunities and outlook for investors.

With about one-third of the world’s population in lockdown at the time of writing and a barrel of Brent crude selling for prices not seen in many years, the coronavirus has led to an economic shock as fast and hard as the world has ever seen.

Clearly, the outlook for commodity markets will depend on the economic impacts of the virus, but the extent and duration of the pandemic remain uncertain. There is a scenario in which China’s efforts to control the virus prove effective enough to enable a China-led global demand recovery. We would expect this to be most immediately beneficial for metals & mining, especially base metals & bulks. However, at this stage — with the virus far from contained, governments still formulating their responses, and central banks beginning massive stimulus programmes to try to limit the economic damage — the range of potential outcomes remains wide.

In the Natural Resources Indicator, we assess the risks, opportunities and investment outlook across a broad range of commodity markets and environmental sectors. We include deeper dives on the following:

  • Oil
  • Environmental sectors and renewables
  • Steel
  • Copper
  • Gold
  • Silver
  • Rice
  • Nitrogen

Penning this from our respective homes, normality still seems some way off. But the pandemic has not altered the fact that the world still requires every one of the commodities we invest in, as well as companies that produce them. Moreover, there remains a huge task ahead of us all to put the global economy on a more sustainable footing, and we expect the energy transition will continue across industries, notwithstanding a near-term hiatus.

Not every commodity and environmental company will get through this unscathed. But it is worth remembering that those that do will have a tremendous opportunity to grow and gain market share. In the meantime, there will be opportunities to buy into some good businesses at prices we have not seen for a long while.

 

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Specific risks

All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.

Authored by

Natural Resources team

Important Information

This communication is provided for general information only should not be construed as advice.

All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

All rights reserved. Issued by Ninety One, issued April 2020.