BlackRock Energy and Resources Income (BERI), formerly BlackRock Commodities Income, reported final results to 30 November 2019. Resources were mostly out of favour with investors, against a backdrop of low inflation and an increasing focus on climate change.
NAV and share performance summary:
- NAV total returns were +4.4%
- Share price total returns were (1.3%)
Manager’s review – mining fared better than energy
In the manager’s report section, Olivia Markham and Tom Holl said that “Whilst the mining sector just failed to keep pace with broader markets, energy companies again underperformed and delivered a negative return for the year. This was a result of exploration & production companies underperforming again as investors fled riskier oil companies and sought their exposure via the Integrated Oil Majors, which actually fell less than the price of oil over the twelve months. The investment portfolio continues to focus the majority of its energy holdings in the integrated oil companies (IOC) because many of these offer attractive yields and evolving business models, and because we cannot see a clear catalyst for E&P companies to deliver a sufficiently large inflection in returns to compensate for their higher risk business models.”
The following table has been taken from the market overview section of BERI’s results announcement (they sourced it from Datastream and Macquarie).
| 30-Nov-19 | 30-Nov-18 | % change | |
| Base Metals (US$/tonne) | |||
| Aluminium | 1,792 | 1,957 | (8.4) |
| Copper | 5,843 | 6,227 | (6.2) |
| Lead | 1,923 | 1,961 | (1.9) |
| Nickel | 13,618 | 11,136 | 22.3 |
| Tin | 16,504 | 18,398 | (10.3) |
| Zinc | 2,300 | 2,655 | (13.4) |
| Precious (US$/oz) | |||
| Gold | 1,462 | 1,219 | 19.9 |
| Silver | 17 | 14 | 19.7 |
| Platinum | 894 | 805 | 11.1 |
| Palladium | 1,832 | 1,205 | 52.0 |
| Energy | |||
| Oil (WTI) (US$/Bbl) | 55 | 51 | 8.7 |
| Oil (Brent) (US$/Bbl) | 65 | 58 | 12.2 |
| Natural Gas (US$/MMBTU) | 3 | 5 | (43.5) |
| Uranium (US$/lb) | 26 | 29 | (10.7) |
| Bulk Commodities (US$/tonne) | |||
| Iron ore | 87 | 65 | 33.8 |
| Coking coal* | 260 | 314 | (17.2) |
| Thermal coal | 69 | 103 | (32.6) |
| Equity Indices | |||
| EMIX Global Mining Index (US$) | 788 | 657 | 19.9 |
| EMIX Global Mining Index (£) | 609 | 515 | 18.3 |
| MSCI World Energy Index (US$) | 304 | 318 | (4.4) |
| MSCI World Energy Index (£) | 235 | 249 | (5.7) |
BERI’s chairman, Ed Warner, discussed the outlook for mining, noting that “In the mining sector, future prospects depend to a large extent on the outlook for global trade and economic growth in China; the ongoing trade tensions between the US and China are likely to drive continuing volatility. This uncertainty has contributed to steel, iron ore and copper inventories running at lower than historical averages, which leaves these commodities well positioned to benefit from any upturn in economic activity; the manager believes that the outlook is positive for such commodities and the portfolio has substantial holdings in the major diversified mining companies.
In the energy sector, structural shifts away from carbon-based energy supplies towards alternative and renewable energy sources continue to gain momentum, and are likely to cause permanent change in demand for these fuels. If the move away from carbon based fuels presents challenges for some entities in the company’s investment universe, it creates opportunities elsewhere, and although there is still a strong rationale for investment in the traditional sectors of the industry, the Board is increasingly mindful of the growing use of renewable sources of power in electricity generation and the rapid development of energy technology.”
BERI: BlackRock Energy and Resources Income reflects on year where mining outperformed energy