Moreover, expectations that the Chinese economy is slowing would add further pressure on the mining industry. The Chinese government has cut its national economic growth target to 7% for the year from 7.5% for 2014. China, which makes up 40% to 50% of global commodity demand, is shifting its economy toward a consumer-driven model, a major problem for suppliers of iron ore and metallurgical coal used in steelmaking for infrastructure projects.
Miners may also have to rethink their dividend policies as revenue streams dry up in light of falling commodities prices. The top 40 miners’ dividend coverage, or earnings per share divided by dividends per share, was just 1.1 times, which was worst than in 2013 when miners had to borrow to pay investors, according to PwC. The added weakness in the space could cause companies to cut back on dividends, dealing another blow to more long-term investors. [Global Miner ETFs: Falling Commodities Prices Weigh on Dividend Policies]
iShares MSCI Global Metals & Mining Producers ETF
For more information on the miners sector, visit our metals & mining category.
Max Chen contributed to this article.