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Commodities Sector in 2023: Analysis and Recommendations by Finam

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BNN Correspondents
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Commodities Sector in 2023: Analysis and Recommendations by Finam

The year 2023 presents a mixed bag for the commodities sector. Industrial metals reel under the pressure of high inflation and dwindling demand from China while gold prices ascend, buoyed by potential easing of Federal Reserve monetary policy and record purchases by central banks. Amid these dynamics, experts envisage long-term investments in reliable securities as particularly relevant this year.

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Analysing the Global Commodity Sector

Analysts at Finam have conducted an in-depth study of the global commodity sector and provided their recommendations. In Russia, the steel industry has shown resilience against sanctions, with companies resuming financial reporting and their stock prices growing at market rates. Severstal, a premier Russian steel and mining company, has successfully adapted to sanctions by shifting 90% of its sales to the domestic market. It has reported a production increase of 5% to 8.35 million tons and sales of 8.16 million tons. Finam analysts recommend buying Severstal's shares with a target price of 1678 rubles and a growth potential of 31.3%.

Spotlight on Russian Steel and Gold Producers

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Magnitogorsk Iron and Steel Works (MMK), accounting for about 17% of Russian steel production, boasts low debt and a significant cash reserve, enabling investment in business development. MMK's steel production has surged by 11.4% to 9.869 million tons, and sales have swelled by 10.9% to 8.893 million tons. Finam analysts recommend buying MMK shares with a target price of 65.34 rubles and a growth potential of 29.2%. Polyus, Russia's largest gold producer, plans to develop one of the largest gold deposits, Sukhoi Log, which could bolster production by at least 70%. Polyus' adjusted net profit grew 33% to $1.05 billion, and the company will resume dividend payments in 2024. Finam analysts recommend buying Polyus shares with a target price of 12,116 rubles and a growth potential of 12.2%.

Strength in the American Commodity Sector

The American commodity sector strengthened in November, with gold price increases benefiting miners. VanEck Gold Miners ETF, investing in gold mining company stocks, boasts net assets of $13.5 billion and an expected dividend yield of 1.53% over 12 months. Finam analysts recommend buying shares of VanEck Gold Miners ETF with a target price of $36.8 and a growth potential of 18.3%. Newmont Corporation, the world's largest gold miner, acquired Newcrest Mining, reinforcing its global market leadership. Finam analysts recommend buying Newmont Corporation shares with a target price of $48.9 and a growth potential of 20.5%. Freeport-McMoRan, a major copper producer, has ramped up copper production by 2.7% and gold production by 18.8%. The company's revenue increased by 16.4%, and earnings per share were $0.39, 1.5 times higher than in 2022. It plans to complete the construction of smelting and refining plants in Indonesia in 2024. Finam analysts recommend buying Freeport-McMoRan shares with a target price of $41.5 and a growth potential of 10.3%.

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