First Read: Daily Commodities Note "Middle East disruption easing" Shaw

Research evidence excerpt

First Read: Daily Commodities Note "Middle East disruption easing" Shaw

but we retain a constructive

outlook supported by anticipated Fed easing and ongoing diversification demand, albeit

with more uncertain & potentially delayed price recovery. While we have trimmed near-

term prices (incl. MTM), margins remain elevated, supporting strong FCF and valuations.

This backdrop reinforces a rotation toward quality & defensiveness, with higher-margin

names such as NEM & CMM better positioned than growth peers facing rising capex,

project/permitting delays; our preferences are NEM, GMD, CMM and CYL. Link to note.

Source: UBS.

Miners' Price Review - More than just an AI story. Commodities & the miners have

traded with AI-sentiment over recent months as well as changing views on the

debasement trade & the Middle East conflict. While AI-sentiment & broader macro

moves will continue to drive the overall sector, we expect further divergence between

commodities over the next 12mths due to differing fundamental outlooks. With the

downside risk from 'higher for longer' energy appearing materially lower, we expect the

market to focus on secular growth from electrification/AI with structural deficits

medium-term supporting a bullish outlook for copper, lithium & uranium. The ME

conflict was the trigger for an unwind of the 'debasement' trade with energy-driven

inflation & hawkish Fed narrative resulting in: front-end rates repricing sharply, US real

yields rising & USD strengthening; while the key drivers of the gold bull market remain in

place, the near-term outlook is uncertain. Changes in supply outlook in Indonesia create

a more positive outlook for nickel and less favourable outlook for aluminium, albeit in

our view this is largely priced-in & the risk vs reward is improving.