How’s the world economy doing?


Crazy bad if you look at the commentary of the doom-mongers who refute the efficacy of modern monetary theory and highlight the collapse in short-term GDP numbers in major economies round the world.


On the other hand, if you take base metals prices as your bellwether the picture’s altogether different. Commodities investors have been bullish on copper for some months now, and iron ore too has been going strong.


These two metals are at the core of ongoing growth in China, which it now appears only briefly broke its stride during the worst vagaries of the coronavirus crisis in the early part of last year.


Since then, China’s economy has been sucking in base metals as usual, and given that there have also been supply disruptions as the virus has closed or restricted some operations in South America, the upward pressure on prices has been marked.


This week, Credit Suisse raised its forecast prices for iron ore by more than 40% against this strong supply-demand backdrop, citing support for Rio Tinto (LON:RIO)(ASX:RIO) in particular as it did so.


“We revise our crude steel production forecasts to now assume 1.9% growth year-on-year in 2021 and also account for lower iron ore supply from Vale (NYSE:VALE) driving the higher iron ore prices,” Credit Suisse said.


That bullish outlook for iron ore supports not only Rio Tinto, which Credit Suisse reckons could benefit by an uplift in earnings of between 40% and 60%, but also other companies with significant exposure to the sector like Anglo American (LON:AAL) and Fortescue Metals (ASX:FML).


In the case of BHP (LON:BHP)(ASX:BHP) Credit Suisse reckons the upside is already priced in.


But the same may well not be true of other more junior companies in the iron ore space, which in times of low iron ore prices often struggle to gain traction.


Thus Alien Metals (LON:UFO), which also has exposure to silver, has been strongly supported in the market of late, and continues to benefit to its judicious exposure to a wide range of in-vogue commodities.


Shares in Anglo Pacific Group (LON:APF)(TSE:APY), which has exposure to iron ore in its royalty portfolio, as well as a strongly-performing coal revenue stream, have risen by 25% in the past two months, and look likely to be well supported on the current commodities outlook.


Other iron ore companies that could also benefit include Zanaga Iron Ore (LON:ZIOC), which has assets in West Africa, Macarthur Minerals (ASX:MIO), Venture Minerals (ASX:VMS), Fe Limited (ASX:FEL), Anglesey Mining (LON:AEY) and Black Iron (TSE:BKI).


There could also be a new kid on the block pretty soon, as plans are well advanced for the spinning out of the Australian iron ore assets of Jupiter Mines (ASX:JMS) into a new vehicle. London-listed project generator Red Rock Resources (LON:RRR), which has a long-standing relationship with Jupiter, would likely also have a stake.


Other go-to iron ore companies for investors include Ferrexpo (LON:FXPO), and VALE, which remains somewhat constrained by conditions in Brazil.

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