Analysts at Credit Suisse have today slashed their price targets for many companies in the Metals&Mining sector. In particular, their global commodities team has adjusted its commodity price forecasts, with the largest cuts having been made to iron ore and coking coal, along with minor changes elsewhere.

Following on from the above, they have lowered their 2013 earnings per share estimates (EPS) for the most majors by 15-40%: BHP (-14%), Rio Tinto (-39%), ENRC (-27%), Anglo American (-26%), Antofagasta (-1%), Kazahkmys (+12%), African Minerals (-80%), London Mining (-82%), Ferrexpo (-50%), Amplats (+2%), Impala (+1%), Aquarius Platinum (+143%) and Lonmin (-83%).

Cyclically, they say they are "positive," given that current apparent demand is running below trend, but their strategists expect growth momentum to improve over the next six months, seasonality is supportive Oct-Apr and consensus estimates have been revised down sharply in recent weeks and now appear more realistic.

However, amongst the structural headwinds to be taken into account they highlight the fact that Chinese steel growth is in a structural slowdown "(we assume 4-5% pa 2012-15) against seaborne supply growth of close to 10% pa poses a structural risk to prices. All companies beyond the lowest cost producers (RIO, BHPB) and those that can execute on growth are at potential risk," they explain.

In this same vein, they comment that: "the sector faces major headwinds through structurally slowing demand growth, falling margins and returns and weak cash flows. We continue to prefer companies that offer defensive margins and valuations, volume growth and lower execution risks. Our focus on valuations, FCF and dividendyields continues to favour the higher quality majors, RIO and BHP and, for a beta rally, we like AMI and LOND. Least preferred stocks: AAL, LMI, Amplats, KAZ."

AB

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