Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at

Why JPM's Gregson believes it's a turning point for commodities

by Emily Blewett on Jan 10, 2013 at 14:21

Why JPM's Gregson believes it's a turning point for commodities

Ambiguous global growth outlooks and mismanagement concerns have caused turmoil among commodity companies but JP Morgan’s Neil Gregson believes the sector is heading for a recovery.

The natural resources manager, who oversees more than €2 billion in assets and runs the JPM Global Natural Resources fund, says the industry has struggled over the past two years as some resources companies have poorly executed many project bids.

But an increase in demand for commodities from China and greater discipline from management in capital expenditure will help lift the prices of both resources and equity in the sector in the first part of this year, Gregson wrote in his latest outlook.

'China remains the key player in commodity markets and while GDP stabilized some time ago, only recently has the pick-up in activity begun to flow through to final commodity demand.'

'This dynamic should support commodity pricing through the first half of 2013,' he said, adding that stocks in the JPM Global Natural Resources fund  had a bias towards copper, iron ore, mineral sands, gold, oil & gas.

However, he believes investors should be cautious towards metals like aluminium, nickel and zinc due to a less stable market outlook.

Closing the margin squeeze

Whilst the gold price saw a steady increase in the first half of last year, equity prices of miners lagged considerably behind. Beside poor dividend payouts, mining companies' management has been criticised after evidence of overbidding for projects that were vulnerable in the face of political risk.

This, according to Gregson, will now turn into a positive for cost pressures in the industries that have, until now, squeezed profit margins.

'We believe expectations have overshot to the downside and that we have moved through trough earnings, particularly for the miners,' he wrote.

'Management teams within the sector are showing a greater focus on capital discipline which will feed through into positive earnings and cash flow surprises in the first half. Moreover, cost pressures across the industry are easing as project cancellations from many of the major diversified companies free up labour and reduce equipment lead times.'

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home

As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Investing for income in a changing environment

With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop

More about this:

Look up the funds

  • JPM Global Natural Resources A Acc EUR
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Neil Gregson
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us


On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet