RBC upgrades Glencore, BHP on outlook for metals and mining

Stay the course through light turbulence for base metals and bulk commodities, RBC Capital Markets urged as its analysts upgraded ratings on Glencore and BHP Billiton.

The global economy is on a strong footing and will continue to drive demand for metals, the analysts said. Short-term volatility could provide buying opportunities for those prepared to stick the course, they added.

Some warning signs have emerged for copper and iron ore with copper inventories rising but potential labour disruption could be a catalyst for a multiyear copper rally. Investors should add to copper positions at attractive valuations and gold to hedge against volatility, RBC said.

RBC upgraded Glencore to ‘top pick’ from ‘outperform’ because the miner and commodities trader is a compelling exposure through a weaker overall environment. The analysts also upgraded BHP Billiton to ‘sector perform’ from ‘underweight’ and kept their ‘outperform’ rating on Anglo American. Rio Tinto stayed as a ‘sector perform’ share.

The analysts shaved 10p off their Glencore price target to £4.60 but made bigger cuts to their for Anglo American, £19.50 from £22, and Rio Tinto, £39 from £42. They trimmed the price target for BHP Billiton to £14 from £14.50.