Industrial metals - price hiatus ahead

mineweb.com,

According to the Royal Bank of Scotland, September and October could well be poor months for non-precious metals miners.

in a report titled, "Diversified Metals & Mining: Q4 2010 Commodity Price Revisions & Outlook," the bank writes, year-to-date share price movements point to the fact that the world has moved into what it terms the "second phase" of the mining cycle, which is characterized by volatile but largely sideways movement for mining equities.

It notes that while phase one of the cycle, which they posit began in December of 2008, sees mining stocks rally on the back of improvements in "liquidity and the resulting balance sheet relief, the turn in global economic leading indicators, weakness in the U.S. dollar, commodity purchases by China, the resulting drawdown in exchange inventories and the increase in commodity prices", it is not a sustainable uptick.

" The optimism toward mining asset prices generated by the turn in leading indicators and the resumption in economic and commodity demand growth eventually gives way to the reality of lagging fundamentals as economic growth slows. The shares give up some or all of their gains and move into a broad sideways trading range until industry fundamentals catch up," RBS analysts write. (more)