Once Bullish, Miners Not Seeing Near-Term Recovery In Metals Prices

In a sector that is battling overcapacity, a WSJ report says miners are not seeing the imminent recovery in commodity prices such as copper, iron ore and other metals and resources that rallied through much of this year, but this month headed lower.http://www.wsj.com/articles/once-bullish-miners-turn-bearish-on-metals-prices-1464253488"From lows hit as early as January to May, copper gained 17%, nickel rose 25%, and iron ore, a key ingredient in steelmaking, shot up 75% to $68.70 a metric ton," the report noted.The commodity prices have rallied on the expectations that the Chinese government would provide more stimulus to resurrect the economy that in turn creates more demand for metals and iron ore. Further, a weak dollar and low interest rates ensured that the rally continued.However, the recent strengthening of the dollar due to expectations Fed may hasten the pace of rate increases along with China playing down expectations of further stimulus has cut short the commodity rally. "Although we have recently seen some positive signals...we are expecting another year or two of low copper prices," the report said quoting Jean-Paul Luksic, chairman of Chilean copper producer Antofagasta PLC."I would say the recent softness has more to do with increased expectations that the Fed will raise interest rates in June and its effect on the U.S. dollar," said Tom Albanese, chief executive of India-focused mining giant Vedanta Resources PLC. Mr. Albanese also believes that the rally just went "beyond what the fundamentals would suggest."Meanwhile, analysts have repeatedly called for the closure of more mines and smelters "for prices to really bottom out."The report recalled the words of Lakshmi Mittal, chief executive of the world's largest steelmaker, ArcelorMittal SA (ADR) (NYSE: MT), who said that China has yet to fulfill a promise to shut down more than a hundred million tons of excess steel-production capacity.