What is it?
The metals & mining industry is made up of companies focused on the discovery and extraction of metals and mineral reserves. These metals and minerals are then purposed for jewellery, industrial applications, and investments.
Why is it important?
The metals and mining sector is important because its products are used extensively as inputs in other sectors’ production line. A change in the price of certain raw materials has a domino effect that has a serious impact on other companies’ cost structure. Resource rich emerging markets often depend heavily on their mining sectors for their GDP figures and overall performance.
- Anglo American
- BHP Billiton
- Newmont Mining
- iShares MSCI Global Metals & Mining Producers
- SPDR Metals & Mining
- S&P 500 Metals & Mining
When does it do well/badly?
The metals & mining sector’s performance is tied closely to the health of the global economy and strength of the dollar. These companies are quite unique in that their prices change in response to both business metrics and the global pricing of its product. When both factors sync up, the company performs its best. On aggregate, however, these companies perform best when their commodity prices are the highest.
Why should I invest?
Metals and mining companies can perform extremely well when global conditions in the commodity markets are favorable with sharp growth in times of rising commodity prices. Many of the larger companies are highly diversified across multiple commodities to hedge against supply-side constraints in one particular commodity, giving investors a more stable return. Although these companies are cyclical, they can offer an excellent growth component to a portfolio when global conditions are favorable.