Recovering commodities markets are restoring hope to Australia’s mining sector as an expected economic upturn sends resource prices soaring.
The CRB Index of key commodities jumped 14% in May, marking the biggest surge in over 30 years as investors anticipate a rebound in demand later this year.
Copper and oil prices have also sky-rocketed, rising 59%.
Kinetic Securities chief economist Clifford Bennett said stockpiling materials ahead of the end of the global recession, teamed with a weakened U.S dollar have prompted the recent gains.
According to Bennett, some investors are also reacting to views the worst of the Australia’s economic slowdown is over.
“People are starting to grasp the idea that they are not going to see the apocalyptic downturn in the Australian economy,” he said.
“The Australian economy is already on the uptick, and data will continue to suggest that it will go forward.”
While some are optimistic the market will recover, others say it is impossible to gauge commodities demand in the short term.
BHP Billiton CEO Marius Kloppers said he is “cautiously optimistic”, as China’s trade performance is still unclear.
“Current buying levels are a combination of restocking and demand and we will only get a stand-alone picture of underlying demand when restocking is complete,” he said.
The Australian dollar hit more than $US0.80 yesterday, which will continue to affect global commodities markets.