Biden infrastructure plans could see miners surge once more

Commodities pause, but could resume from here

2020 was a positive one for commodity prices, with Chinese industrial expansion helping to make up for economic weakness around the globe. Even ‘Dr Copper’ has managed to see a huge expansion despite the clear lack of growth evident over the course of 2020.

Nevertheless, while services were hit hard, manufacturing has managed to get back into a more positive position thanks to financial support on the government level. So much so that the German manufacturing sector just posted a record 66.6 manufacturing purchasing managers index (PMI) reading.

Nevertheless, while 2020 industrial strength helped drive upside for commodity prices, we have seen significant questions arise since as traders consider a potential withdrawal of stimulus from the likes of China.

Biden plans highlight commodity super-cycle claims

Recent claims that we are on the cusp of a commodity super-cycle are driven by huge green infrastructure plans throughout the Western world.

That will be brought into the limelight once again in the coming week as US President Joe Biden lays out plans for a whopping $3 trillion infrastructure bill.

Whether that gains approval or not remains to be seen, but it does highlight the huge amount of raw materials that will be required as countries spend big in the name of energy transition.

While some believe China could ease back a little on their expansion, it seems likely that their insatiable desire for growth will continue to necessitate substantial imports of key commodities.

Meanwhile, major infrastructure plans in the Western world add further fuel to that fine.

Bullish momentum could be growing for FTSE miners

The relative rotation graph is a key tool for traders seeking to understand which stocks could come into and out of fashion at any given period of time.

Interestingly, we can see that miners BHP Group, Rio Tinto, Anglo American, and Glencore are all reversing up towards the ‘improving section.

That highlights the potential for future outperformance for the sector, tying up with the increased focus on infrastructure spending growth in the US. As such, keep an eye out for future strength in the mining sector following a period of consolidation.

Pullback brings potential buying opportunity

The chart below highlights the performance of the likes of Anglo American, BHP Group, Rio Tinto, and Glencore against the price of copper and iron ore.

All those markets retain a trend of higher highs and higher lows despite recent losses. As such, the current pullback looks to be a retracement within a uptrend.

As such, until we see a break below the prior swing-low, the current pullback is expected to mark a strong buying opportunity for mining stocks.