The price falls are hitting Australia’s mining sector hard. Earlier this week, billionaire Andrew Forrest’s private company Wyloo became the latest to mothball several nickel mines it bought for $760 million just six months earlier.
Shares of embattled lithium developer Liontown sank a further 20 per cent on Monday after lenders withdrew a $760 million loan to fund the development of its WA mine, citing a poor price outlook. Lithium producers like Core Lithium have also been curtailing production.
The declines have also hit funds betting on the electric vehicle revolution. Ausbil Global Resources Fund – which ramped up its exposure to battery materials as prices began to decline part way through the year – sank 42 per cent in 2023.
Coming into 2024, Mr Berridge said he was hesitant to enter the nickel sector, despite mine closures signalling the market could be bottoming. Instead, Perennial has shifted to a greater exposure to copper after signs of supply shortages began to emerge last year.
“The outlook for copper improved materially in the last couple of months, and I don’t think that’s been fully reflected in the price,” he said.
Copper prices declined for much of last year, but have begun to tick up after key global copper producers Anglo American and Vale reduced their production forecast for the metal last year, citing issues at its South American mines.
Concerns of a deficit have been amplified after the Panama government ordered the closure of First Quantum’s Cobre Panama mine, following a court ruling that the company’s mining licence was unconstitutional.
Perennial aren’t the only ones betting on the industrial metal. Fellow Australian resources stock pickers Terra Capital has more than 15 per cent exposure to copper according to its December filing, its largest position in the portfolio behind gold, which is more than 20 per cent.
Likewise, on a call with investors last week, Paragon Funds Management’s John Deniz said global copper inventories were entering “critically low” territory.
“If you look at the previous two times this happened: in the late 1980s copper rose 150 per cent, and in 2006 it rose 175 per cent,” he said.
“We’re not saying that copper will rise by that amount, but of course, it could.”
Beyond copper, Terra Capital and Paragon are betting big on a precious metals boom in 2024, despite the price of gold rallying more than 10 per cent already since October alongside hopes global interest rates may have peaked.
In ANZ’s latest global commodity outlook, gold was among the few commodities strategists Daniel Hynes and Soni Kumari remained bullish on in both the near and long term.
“Gold is benefiting from both geopolitical crises and a recent USD selloff. Investment demand, which has been largely lacklustre this year, is firming up,” the pair said.
“We expect gold to trade above $US2000 per ounce next year as strong central bank purchases will be joined by strategic investment demand.”
The bank forecast the price of gold to peak at around $US2200 in the final quarter of 2024.
Mr Deniz named the precious metal among the portfolio’s biggest themes coming into 2024, with a 44 per cent exposure.
“If you look at previous pivots by the Fed to dovish, we’ve seen some outsized gains in gold and gold miners,” Mr Deniz told investors on a call last week.
“This is only the second time since we’ve launched that we’ve had a position like this. We’re very constructive on the gold price.”
“It’s been pretty depressing in resources generally, if it wasn’t for nuclear it would’ve been worse,” said Ben Cleary, who manages Tribeca’s Global Natural Resources Fund.
Mr Cleary said his fund’s energy sector exposure was now evenly split between traditional oil and gas and uranium.
“Uranium has a huge amount of momentum behind it. I think that probably keeps going for a little while yet.”
Uranium’s price rallied more than 70 per cent to decade-highs last year amid limited supply and emerging demand from Western countries looking to nuclear energy to help meet net-zero targets in the coming years.
Sentiment was further bolstered earlier this month after Kazatomprom, the world’s largest uranium miner, warned it was likely to fall short of its production targets over the next two years.
The price rally has driven ASX uranium play Boss Energy up 125 per cent in the last 12 months. Fellow uranium stock Paladin Energy is up 50 per cent in the same period.
Mr Cleary said the fund had been invested in the sector for the last five years and witnessed the supply deficits continue to mount.
“North America, Europe, Germany, and China and India are all looking to at least maintain their nuclear consumption, but most of them are actually increasing their mix of nuclear, which is going to drive these big deficits even higher,” he said,
Mr Deniz said uranium was undeniably a “really strong bull market”, adding that the fund’s energy exposure was its second largest at 28 per cent, which comprised predominantly of two uranium investments.
“It’s clear to the masses now that deficits are here and here to stay,” he said.
“Uranium is at 17-year-highs now, trading over $US100 per pound, and we expect all-time highs.”