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BlackRock-managed Global Mining Investments Ltd has a preference for copper, gold and iron ore as China leads a global recovery in commodities markets but is negative on aluminium because of oversupply, the firm’s chief said on Tuesday. Forecasts for tight supplies of industrial metals such as copper and iron ore combined with robust demand from China remain key considerations in GMI’s investment choices, GMI chairman John Robinson told Reuters.

“There’s just not enough new supply coming on to compensate for the increased demand in these sectors,” he said. “Outside of aluminium, these are areas that look pretty good.”

BlackRock manages the world’s largest mining mutual fund with about US$30 billion (RM101.7 billion) invested in international stocks. GMI beat the HSBC Global Mining Index benchmark by 1.8% over the latest three months and by 7.8% in 2009. “The aluminium sector we are less favourable towards,” Robinson said. “It looks like it will suffer for some time from a supply imbalance.”

Aluminium inventories in London Metal Exchange warehouses have ballooned to near-record levels above 4.5 million tonnes. GMI takes exposure to commodities via mining stocks, rather than directly through commodities markets, which can be too volatile at times, according to Robinson, who said the firm typically took a three-to-five year view before investing. “Metals prices are jerked around on a day-by-day basis and we don’t try to get into the business of predicting where prices are going to go,” Robinson said. “We look at the long-term fundamentals and invest on that basis.”

Robinson said his positive view on gold was based on declining mine production and an appetite among banks to beef up bullion reserves.

The International Monetary Fund last year announced it would sell a total of 403.3 tonnes of gold, which has only been made available to central banks on a first-come-first-serve basis until now. So far, India — the world’s biggest consumer of gold — Mauritius and Sri Lanka have purchased a total of 212 tonnes of gold from the IMF, which says the remaining 191.3 tonnes is to be sold open-market.Gold reached a one-week high of US$1,123.30 an ounce on Monday, but remains well off December’s record high of US$1,226.10 an ounce.

Robinson also predicted the demise of annual benchmark iron ore prices, which he said would benefit mining companies seeking to sell ore into potentially more lucrative spot or index-priced systems. Spot iron ore prices are more than double benchmark prices. The world’s top three iron ore miners, Vale, Rio Tinto and BHP Billiton, account for nearly 30% of GMI’s overall investments. “We’ve already seen Vale more or less realign itself with Rio and BHP. Certainly in the iron ore area, it looks as though change is very likely,” Robinson said. Steel mills in China and Europe are opposed to scrapping annual benchmarking, fearing it would lead to uncertainty over costs for a key raw material.

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