A Comprehensive Guide To Mining Industry ETFs - ETF News And Commentary

Benzinga.com
0 Comments|June 12, 2014

The rise in global population, growth in the Chinese economy, urbanization of the Asian countries and increasing requirements of the developed countries have created an unprecedented demand for minerals and metals. The metals & mining industry caters to this ever-rising demand through extraction (mining) and primary and secondary processing of metals. However, of late, the tepid global economic growth and a slowdown in the Chinese economy have emerged as major headwinds for the metal industry worldwide.
 
Let's have a sneak peak at what is in store for the major industrial metals ? Iron, aluminium and copper. (Read: Inside the Volatility ETF Crash; Is a Rebound Coming?)
 
Iron: There is a threat of oversupply in 2014 as major iron ore producers, Rio Tinto plc (NYSE: RIO), BHP Billiton Ltd. (NYSE: BHP) and Fortescue Metals Group Ltd. (FMG.AX) have ramped up production in Australia, betting on continued strength in iron ore demand over the long term. Thus, Australia, the world's top exporter of iron ore, will continue to increase its shipments followed by Brazil and India.

An impending slowdown in China's growth is bound to affect prices as it is currently the largest producer of steel and consequently the largest consumer of iron ore, accounting for around 60% of the global seaborne market. Thus, the mismatch between the excess supply and demand for iron ore will keep iron ore prices subdued in the near term.
 
Aluminium: Having endured the ill consequences of a chronic surplus, the global aluminium industry is going through a substantial change. Companies like Rusal and Alcoa Inc. (NYSE: AA) have cut back on production and taken up a number of restructuring measures (including closure of smelters), and are aggressively pursuing cost-cutting measures. (Read: 3 Commodity ETFs beating the market in 2014)
 
On the demand side, aluminum consumption is expected to improve throughout the world, spurred by the automotive and packaging industries ? the key consumer markets. The automobile market is becoming increasingly aluminum-intensive, given the metal's recyclability and light-weight properties. The global push to make vehicles more fuel efficient is expected to more than double the demand for aluminum in the auto industry by 2025. The airline industry is also expected to boost demand for the light metal.

Following China, which accounts for over 40% of the global aluminum consumption, India appears ...

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