We are at start of a fresh bull run in commodity market, says JP Morgan India's Pinakin Parekh

JPMorgan India’s Executive Director - Metal & Mining and Oil & Gas analyst Pinakin Parekh believes that we are at the start of a fresh bull run in the commodity market.

"The last one lasted for 12 years peaked at 2008 and for the last 12 years, we are in the downcycle," he said while sharing his views and outlook.

“If you look at demand/supply dynamics, demand is recovering from post-pandemic levels but we are not seeing any big surge in demand. So, if it is a super cycle, we probably are at the very early days of it,” Parekh said.

He believes higher fiscal support and higher infrastructure spending globally would lead to higher commodity prices.

“At this point of time, the way investors are looking at it is that this is more of supply-driven higher prices which should normalize once the economy re-opens across the world. If we do have higher fiscal support and higher infrastructure spending globally, we could see higher commodity prices,” he said.

At this point of time, JPMorgan is expecting a pullback in prices over the next two quarters for ferrous and non-ferrous.

“Prices in the spot market have been stubbornly high. Across the complex, we are not seeing any sign of a pullback. So, we continue to see broadly upside consensus to earnings because everybody expects a pullback in prices which so far is not taking place,” he said.

On steel companies, he said, “What we are seeing in steel at this point of time is that all the large mills are operating at peak utilization. There is very little spare capacity left for them. If you look at the data of December and January, India had turned into a net steel importer after more than one and a half years. The demand is running very strong.”

Parekh believes ferrous would see more consensus earnings upgrades.

“In terms of the near-term earnings outlook, we believe that ferrous has more consensus earnings surprise simply because the markets are discounting very large decline in ferrous prices and margins. Ferrous would probably see more consensus earnings upgrades,” he mentioned.