Mining sector top share picks

In-demand Glencore (LSE:GLEN) shares are among the top picks after a City bank this week reviewed its mining sector targets on expectations for a de-escalation of the Middle East war.

Deutsche Bank also likes Anglo American (LSE:AAL) as it nears a merger with Teck Resources but has kept a Hold recommendation on iron ore-focused Rio Tinto Ordinary Shares (LSE:RIO).

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The report follows a recent rapid shift in the direction of valuations in the sector, having recovered most of the losses seen after an initial 20% slide from pre-war levels.

Rio Tinto has rallied 18% since 20 March to stand at 7,360p, while Anglo American has lifted 27% to reach 3,631.5p over the same period.

Glencore is up 8% at 562.8p, having been the most resilient of the trio after Middle East disruption caused power generators to switch from gas to coal use.

The company is the world’s largest seaborne thermal coal exporter, with a 17-month high for the price of Newcastle coal helping shares to rise from 534p prior to the war.

The FTSE 100-listed stock is up more than a third so far this year and significantly improved on last April’s four-year low price of 233p.

However, Deutsche Bank believes Glencore continues to offer an attractive risk/reward profile after lifting its price target from 555p to 610p.

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As well as the large thermal coal export business and benefit of commodity trading operations, the bank highlighted the potential for copper volume growth over the next one or two years and the possibility of a revival of merger discussions with Rio.

Its price target on Anglo American is now 3,800p, although it points out that copper-focused names are more exposed in a downside economic scenario.

The bank said: “The Anglo Teck merger is progressing towards completion, creating the world’s premier listed copper company in our view, and Anglo’s remaining asset disposals (coking coal and De Beers) could potentially be announced in the second quarter.”

The copper price bottomed out at near to $12,000 a tonne in late March but has since rallied to more than $13,000, with encouraging China demand indicators among the factors in the return to pre-war territory.

Deutsche Bank’s year-end price target is $12,800 a tonne, having been at $12,125 previously.

It believes a favourable copper price regime is here to stay, although it assumes some moderation will be evident in the second half of 2026 and into 2027 as mining supply improves following severe disruption in 2025.

The estimate for aluminium is $300 higher at $3,400 a tonne, but the bank warns that the price could spike to more than $4,000 a tonne if the Strait of Hormuz does not reopen soon.

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Iron ore has risen modestly since the start of the conflict, with the bank expecting the commodity to remain rangebound after trimming its estimate to $101 a tonne. Iron ore is Rio’s largest exposure, accounting for about 50-60% of underlying earnings.

This week’s forecasts reflect the bank’s base case that there will be a de-escalation of the Iran war over the coming weeks, although it accepts there are still significant uncertainties.

It added: “Once the fog clears, the positive drivers supporting high metal prices should reassert; namely, a firmer global growth outlook, supply constraints, and potential for renewed US dollar weakness.”

Rio Tinto is due to publish a production update on 20 April, followed by Anglo American on 28 April and Glencore on 30 April.

Inflation and supply chain pressures will be in focus, particularly with oil and freight substantial cost components in relation to iron ore and coal. However, the bank expects UK-listed mining stocks will hold off changing unit cost guidance until the mid-year point.