welcome to ft markets today's topic is
commodities and i'm here with Neil
Gregson who's the manager of JPMorgan's
natural resources fund it's been a
dismal time for commodities over the
past 12 months 2015 was one of the worst
years on record for commodity
performance but we've seen a great
uptick this year and I'm here to discuss
the reasons why with Neil Neil we're out
of the supercycle what was the what up
to the moment are we at for the
commodities outlook would you say at the
moment I think with nothing with getting
through the worst i think we're through
the denial phase now so you mentioned
2015 as being a bad year well we've had
an unprecedented five years down in the
mining sector albeit after a super cycle
interrupted briefly by the global
financial crisis but we're seeing all
the behavior that we've seen in past
down cycles that is fairly typical at
the bottom so I'm not surprised to see
an increased interest in the sector over
recent months so good oh particular
let's look at some of the reasons why we
saw the supercycle in the first place
and see what some of the data is telling
us about where the industry is the first
thing to talk about if we can look at
the first chart is capex capital
expenditure by mining companies over the
the period we saw a massive rise and now
we've seen a steep fall off what's that
telling us about where we're going to be
Neil it's telling us that there's going
to be less supply in the future so so
just as that chart shows the reaction to
high prices and more and more supply the
industry reacting to lower prices which
means less supply in the future so the
markets will balance again they always
have to balance yeah to a large extent
it's been a supply story hasn't it and I
think we need to look at the next chart
to see where the supply stories heading
for 2016 this is a chart that shows
small Rises very small risers for a few
commodities but generally supply growth
trending downwards so we're going to see
restricted supply this year particularly
for some of the base metals Neil is that
going to be enough really to change the
outlook since fundamentally here well I
think it will be even with a modest up
to uptick in demand and what we're
seeing is many of these commodities that
were deep into the cost curve so lots of
minds are losing money some mines are
getting old and closing such as century
zinc one of the world's biggest desing
mines is now closed in other areas like
in copper and zinc we've had lots of
announcement
from companies like Glencoe about
cutting production and in iron ore the
high cost Chinese production is also
falling so the industry wrap reacting
Indian cheese will fall and this
perception of this bet against
commodities forever will start to change
as the markets balance out so you only
need a modest improvement in demand to
to help prices move upwards so the next
obvious question and the others are we
going to see that modest increase in
demand what's your forecast for where
we're going there well I think we are
seeing reasonable demand obviously
Chinese been very very weak for a number
of years but that's pretty much a
consensus trade so there still is some
infrastructure spending clearly
consumptions okay yet the u.s. seems to
be performing okay as well so while
Singh modest improvements in demand but
nothing nothing stellar but again with
the supply cuts that we've seen and
announcements that we've seen about
future supply cuts that's going to help
a lot so I think we are through the
worst through the worst Neil gregson
thank you very much for joining us this
morning thank you