Where do emerging markets sit within all this?

Growth in the emerging markets like China is not accelerating as fast as some would like, in the way they would like. Firstly, as mentioned above, China is transitioning, which is actually a good thing for some commodities – your diamonds, platinum and copper. But let’s address industrial materials too – coal, iron ore, nickel, oil etc.

What’s growth of 6.9% compared to growth of 7%? In absolute terms (as opposed to percentage terms), 6.9% growth last year is more than 7% growth in 2014. That means demand for commodities was higher last year than it was the year before, in absolute terms. That’s why mining giants like Glencore have always maintained that demand for basic materials remains strong.

The only issue is that the mining companies prepared themselves for constant growth in percentage terms and massively overinvested in commodities, but the market is already re-adjusting. Virtually no one believes that the commodities downturn will continue indefinitely, while virtually everyone believes that the time will come to buy back in to commodities. But whether you see mining stocks primed for a rebound or on the edge of a cliff, it’s our duty to make you aware when we see things changing.

The brokers’ point of view

You’ve seen our take on the situation. But what position are the other institutions taking in all this? The table below details the current consensus on the UK 100 miners, which is neutral-to-bullish (but not too bullish!) with Rio Tinto (RIO) and BHP Billiton (BLT) the only stocks trading below their current average target prices.

Source: Alpha Terminal, 2 March

The reason Anglo American gets the most bearish recommendation consensus is that analysts are worried it won’t be able to sell off the things it needs to (things for for which demand is low) to achieve its goal of streamlining the business.

The reason Rio Tinto gets the most bullish consensus number is that its approach is simply to cut jobs in its iron ore business rather than embark on a long and difficult sales pitch, which will immediately save cash.

Likewise, Glencore has already demonstrated that it’s able to reduce its debt pile with applomb.

Randgold Resources and Fresnillo look to be the subjects of some form of mania, given the strength of the gold price rebound in 2016. Such large moves are seldom maintained in the long term.

So, which miners are set to embark on a serious recovery and which could be primed to head south? Read on to find out!