Buy Hold Sell: A truckload of commodity stocks for your watchlist (including 3 buys)

Recent weeks have delivered a fresh bout of volatility across global markets, driven by tariff tantrums, bending bond markets, and irritable investors.

Nothing has been spared, not even commodities.

Prices for iron ore have softened, copper has been smashed, and coal has continued to come under long-term pressure. But as seasoned investors know, periods of weakness can often uncover the most compelling opportunities.

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With that in mind, Livewire’s James Marlay sat down with two commodities specialists in Janus Henderson’s Daniel Sullivan and Seneca Financial’s Ben Richards to pick through the rubble.

They share their outlooks for key commodities, the forces shaping supply and demand, and where they’re finding value — both on the ASX and globally.

From long-term thematic drivers like electrification and decarbonisation to short-term dislocations caused by policy uncertainty, the discussion goes deep into what matters most for investors right now.

Watch the video, listen to the podcast or read the edited transcript below.

Please note this video was filmed on 9 April 2025.

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Edited transcript

James Marlay: Hi there, folks, and welcome to Buy Hold Sell. My name is James Marlay, I'm your host today and we've got something a little different for the next three episodes. We're going deep into the world of resources. It's a big part of the Aussie market, it's a big part of the global economy, and things are getting interesting, with trade tariffs putting a lot of question marks over a wide range of the commodities spectrum. I'm joined by Dan Sullivan from Janus Henderson and Ben Richards from Seneca, two resources specialists who are going to give us the down-low on what's going on in this interesting part of the market. Today we're going to start big—biggest in the Australian market—iron ore. Dan, it's been pretty resilient, started to show a few signs of weakness. What's your take on, first of all, the impacts of the tariffs, but also the broader cycle for iron ore?

Iron ore

Daniel Sullivan: Sure. So, the impacts of tariffs are affecting everything at the moment. It's more being seen as a risk across pretty much everything, with maybe gold the exception. But in terms of actual trade flows, it's not a huge impediment for Australia. Our US–Australia trade flow is modest. But iron ore is certainly the backbone of the Australian economy and the stock market in the resources space, so they're critically important to us. They're pretty solid cash generators, so they're fairly defensive, and in some ways they've missed a lot of the cyclical highs that maybe copper or gold might have seen. And so they're in a pretty good place still, I think.

James Marlay: In terms of demand for iron ore, any views on the medium-term outlook there?

Daniel Sullivan: Yeah. So, super critical again on China—nearly all of it goes there. And they've obviously been slowing down from their old eights and tens to fours and fives. The trade war will affect them, so that may well push back a bit on total iron ore demand and steel demand. So that is a risk. And we also have Simandou coming on out of West Africa in the next couple of years, so that's a bit of a threat hanging over price. But these are all super low-cost producers in Australia, and Vale in Brazil, and so that new material should displace other high-cost producers, not these. But it will put some pressure on the price.

James Marlay: Yeah, okay. Ben, iron ore—a staple, as Daniel said, of the Australian market. We've got the big players, the low-cost producers, a few smaller operators as well. What's your take on the outlook for iron ore, and whereabouts are you looking in that space?

Ben Richards: Yeah, there's certainly plenty of supply coming on—Simandou, as Dan mentioned, even Onslow in WA, and a couple of other projects in the Pilbara, more longer term. But it's always been a demand-driven story, iron ore. China has had relatively flat steel production over the last few years, and it remains to be seen what impact tariffs will have.
Having said all that, historically there's been a bit of a floor price around that $90-a-tonne range, where that's the marginal price where, on an equivalent basis, China would be producing domestically. So, any lower than that, you start to get some cost-curve support. That's obviously a fantastic price for the Australian majors—your BHP, Rio, Fortescue—to still be generating healthy profits. And we actually believe that the equity prices are discounting that, so the market's pricing quite a bearish outlook. So potentially there's a bit of value there and a margin of safety in those players.

James Marlay: Daniel, just in terms of iron ore—Janus Henderson, you guys do global—obviously these are big stocks on the global stage. Do they have a position in your portfolio at the moment?

Daniel Sullivan: Yeah, they do, and partly that's because they are exhibiting value—cheap, with good yields and fairly defensive. Because I guess our risk spectrum runs down from uranium through silver, maybe gold, lithium's pretty terrible as well in terms of risk profile at the moment, and performance. So they are a good centre position and solid value. As a result of that, as we see other opportunities opening up, we will probably use them as a funding source to buy smaller things that have been really smacked about.

James Marlay: Okay. So on a relative sense, they've been pretty stable.

Daniel Sullivan: Pretty good, yeah.

Copper

James Marlay: Yeah, okay. The other big commodity—it actually was doing pretty well so far this year—copper hit highs in late March, rolled over recently. Ben, what's your take? I mean, obviously quite linked to growth; people look at copper as a bit of a bellwether for future growth. What's your take on the outlook for copper from here?

Ben Richards: Yeah, Doctor Copper's always, as you said, a bellwether. It really depends, I think, how global growth goes with all the Trump tariff activity at the moment. But just on the commodity itself, I think concentrate is still highly sought after. We've seen the copper concentrate refinement charges out of China go negative, so that means that concentrate is really in demand. And the majors know that, so BHP and Rio are trying to buy any copper project that's not bolted down to the ground, and that's a core focus for them going forward to diversify their businesses.

So there's definitely some positive elements of copper, even aside from kind of the GDP-plus growth in things like electrification, EVs, and general thematic stuff there. So we see copper as a neutral, maybe slightly positive bet. We own a small company called AIC Mines (ASX: A1M), which trades at a 40% discount to larger peers like Sandfire (ASX: SFR) and Capstone Copper (ASX: CSC), and it has over three times the production growth.

James Marlay: Yeah. It's always been one of the harder commodities to get a pure-play exposure to. Dan, any comments to add to what Ben said around the outlook for copper and its role going forward?

Daniel Sullivan: Yeah, we agree that the outlook is very robust. I think one of the problems we're facing at the moment is that view is universally accepted. The world's been awash with liquidity and it's been a good macro play for global growth in electrification, decarbonisation—all those things. So I think copper's probably traded 50 cents to a dollar higher than it might've otherwise, per pound. Then we've seen the two squeezes in the North American market, which has put a bit of extra spice in it for traders and interest. And with Trump's policies being announced, a lot of that's rapidly just going out of the price. So I feel as though now we might see copper—because it's been such a big liquidity or trading counter for people—we may actually see it go much lower briefly, but we're still confident that this is a metal that's underpriced.

When I was a kid, copper was 80 cents a pound, then we spent a long time at $2, and now we've been here at $3–$4 for a fair while. I feel quite positive that this will be $7, or $12, or $15. So this is actually probably a great setup—if we get a good drawdown here and stocks come down. And we talk about, "Who are you seeing?" We just saw NGEx (TSE: NGEX), which is the Southern Cone copper in Argentina and Chile. They're cashed up, they may raise some money, it's getting sold off with everything else, but this is the next generation of copper projects. So over the next four or five years, they'll hopefully develop a mine. And that's ideal for us—if copper pulls back, they pull back, you might be able to say, "Great, now we can buy a stock that's low with a copper price that might double." Might be a 100%, 200% move over a two- or three-year period. That's perfect. So that's what we're looking for.

James Marlay: Ben's gone for a pure play. The majors have got a lot of interest in copper. How do you like to play it, through the majors or pure play?

Daniel Sullivan: Pure plays as well. Pures as well. Yeah, the iron ore is so dominant in BHP, Rio that it's... Yes, there's some copper there, but it's not enough. And I think they're not as dynamic, as well, at getting on with making these things happen. I mean, they are growing a bit in that way again, they've sort of shut down their M&A and project building. Apart from building more iron ore mines, a lot of that stuff fell by the wayside. But they are picking that up again now. So they'll participate and they'll be in there, but I think the mid-cap companies will be a lot more dynamic. And there's probably only about 15 of them, and we'll probably see half of them go in this... in this next bottom and up cycle, I think we'll lose half of them probably to those majors, because desperate for the growth.

Coal

James Marlay: Yep, okay. So we've talked about iron ore, pretty stable, talk about copper, positive long-term outlook. We're going to talk about coal miners, not quite so certain about what the future looks like, or it's hotly contested. But investors have made good money out of the dividends these companies have been spitting out. It's come under pressure a little bit lately. What's your view on the outlook for coal production, and coal miners specifically?

Daniel Sullivan: Sure. So the world's been trying to drive coal and oil out of electricity generations for carbon reasons. I think that's sort of happening slowly, but when an enormous economy like China is growing so fast, that's hard for them to slow that down. So yeah, it's still very, very big fuel source. It's under a bit of pressure at the moment. Again, it's a bit like the whole China thing, if China slows down a bit, it'll lean back on coal a bit, and if steel making slows down a bit, it'll lean back on coking coal. There aren't that many really good coking coal resources in the world, so they're fantastic assets, and held probably only by three, or four, or five companies. So it's a great resource to be involved in. We have tended to err off coal a bit. The coal bit's fine, but going into steel making, that bit, we find a little bit boring, because we want the rerate for the resource owner, and it's a bit too linked to that slower growing steel market.

I think gas is the fuel that's really taken off. It's very plentiful, it's cheap, and you can roll out a gas-fired power station in 12 months. So it's filling the gap in a lot of places around the world to get energy on quick, and there's plenty of it.

James Marlay: Okay, and does coal have a place in your portfolio?

Daniel Sullivan: Only in a minor way. So I guess the Aussie companies of a modest size, and the globals, the main global coal exposure is Glencore (LON: GLEN), and we do trade that from time to time. It occasionally trades exceptionally cheap, and if coal prices go for a run, they make a lot of money. But again, even in that company, it's still diversified in some ways, and you don't get the full exposure to just the coal that you might be looking for. So it's not a priority or a focus, but we can get there if we need to.

James Marlay: Okay. Ben, same question for you. It was down to the dumps, had a bit of a renaissance as these coal producers became highly cash generative. Does the coal stock have a place in its portfolio for you?

Ben Richards: Yeah, James, we think the rumours of coal's death have been greatly exaggerated. Still think there's a place for it in the commodities mix and in the portfolio. I think it's probably a two-sided question between the thermal and met coal. Thermal, there's the ESG and emissions angle, which we actually think is in favour of Australian thermal coal, if anything, which is the higher quality 6,000 NEWC spec stuff. We actually wrote a piece on Livewire about it. And if you substitute that out, then you get to the 5,000, 5,500 stuff out of Indonesia, which is actually higher emissions. So we think thermal coal in Australia definitely has a place. Preferred pick there is New Hope Coal (ASX: NHC). We caught up with management recently, they've printed a couple of stellar results in a row. And as you mentioned, many of the viewers might've been paid a few fully franked dividends from them along the journey. So we continue to like them.

The second part of that is the met coal space, where it is tied to the steel complex, which is uncertain at the moment. But we see met coal as quite undersupplied, and the supply of met coal being quite tight. And Australia has a natural advantage, particularly up there in the Bowen Basin. Our key pick is Stanmore Resources (ASX: SMR). And so we've been adding both to New Hope and Stanmore very recently.

And just an interesting point Dan mentioned on the gas angle, which we've seen coal prices and gas prices really diverge, which historically will normalise one way or another, either higher coal prices, or potentially lower gas prices, or somewhere in the middle. So we think coal definitely is a good risk-reward from here.

What else are you buying?

James Marlay: Okay. Now we've touched on a couple of bulk commodities there. Is there something that I haven't brought up that you actually think it's worth paying attention to? Ben, I'll start with you.

Ben Richards: Yeah, we've been doing a lot of work into the second-order derivatives, second-order thinking, some of these picks and shovels plays. So particularly in that small, mid-cap end of the market, we're seeing some good value there, so you don't take on the direct commodity risk. And I'll name a couple of them just quickly. RPMGlobal (ASX: RUL), which is a software provider, has customers like your BHP, South32, Pilbara Minerals as customers. That's growing really strongly. As well as, say, an Imdex (ASX: IMD), which is linked to drilling activity, and we could see a fair bit more of that with the higher gold price, and as well as an XRF Scientific (ASX: XRF), which is just an underappreciated supplier to lab groups like an ALS. So a few names there, but I think good value on the whole.

James Marlay: Okay, so just adjacent to the commodity place.

Ben Richards: Adjacent, yeah.

James Marlay: Same question for you, Dan. In the bulks, something that we've missed or overlooked that you've done some work on?

Daniel Sullivan: Yeah, of the big ones, we're probably got our most conviction in Vale (NYSE: VALE), which is the Brazilian producer. It's very low cost, higher grade than the Australians, it's trading at a cheaper price, it's got a good yield, they've developed their relationship with the government more over the last few years. And we're supported in that by our emerging markets team, who've done a lot of work on as well. Yeah, so it's interesting. There's a thesis that it could double without too much work as long as iron ore is roughly stable. So that's a great place to be for us as a good defensive start with an optionality story on getting up to a better valuation.

James Marlay: Okay. That's some decent legwork for a stock the size of Vale.

Daniel Sullivan: It is. It is. But look, these stocks move around a lot, so it is down a bit, and for various reasons. But that's possible in a big stock. I mean, it's probably not possible to put that case for a BHP very often. But, for instance, in the last big crisis, in the COVID crisis, Exxon sold on 10 times earnings and a 10% dividend yield, and it's like, "Well, we'll take as much of that as we can." So we probably bought 15-20% of the fund in those big integrated oil companies in one day, and they went up 50% in a fortnight. So we're in that sort of environment, where if this risk thing suddenly snaps, Vale could put on $5 in a fortnight, but maybe $10 if we’re lucky. So it is that the mood is so bad that, when it passes, the decompression could be quite extreme.

James Marlay: Alrighty, folks, well, the major commodities under a bit of pressure at the moment, that's proving fertile ground for our two stock pickers today.