There's value in that thar mining sector, says SocGen

The bank said: “We struggle to see sustained positive momentum in commodity prices on a 12-month horizon, given the rising risks of a global economic slowdown and a lack of significant market deficits.”

SocGen analysts also pointed to demand for steel peaking in China, which could drive iron ore prices towards $50/t beyond 2019 “with a recovery to $55/t in the longer term”.

Yet despite that, they remain broadly positive for the mining sector. “There are many reasons for investors to be wary about commodities, from the strong dollar to risks of a synchronised global slowdown.

“That said, the hard landing which topped the list of worries two years ago is arguably not on the cards now.

“We believe that the second worst scenario of prolonged stagnation is not nearly as damaging to the mining sector, with downsides potentially capped at 15%.”

SocGen has adjusted its short-term commodity price assumptions, reducing them slightly for base metals but increasing them for bulks, and has upgraded its long-term price target for nickel.

Of individual stocks, it has upgraded Anglo American to a ‘buy’ on improved financials, and reiterated ‘buys’ on Glencore and BHP Billiton, with the latter offering an “attractive combination of risk and reward”.

Rio Tinto is downgraded to a ‘hold’, however, because of a more cautious stance on iron ore, and Vale is left at 'hold'.