Before looking at the biggest drivers of FTSE 350 miners’ dividends and earnings, let’s take a quick detour into zinc. Stores of the metal are at their lowest in absolute terms since the late 1980s, according to the Bank of Montreal.
This is repeated across several base metals (Shanghai nickel stocks were “critically low” in mid-January, says BMO), but the zinc market is interesting because European smelters have dramatically reduced production in the past year because of energy costs. This has turned China into a net exporter of the refined product, cutting its own supplies. Lower power prices in Europe should make life easier for the smelters, but we think the Chinese economic reopening will drive enough demand to send prices up.
And a similar story should play out elsewhere: iron ore – the key commodity for UK dividends aside from oil and gas right now – is already trading strongly on these hopes.