With the economy recovery maturing, the materials sector, which is closely tied to the prices of raw materials, have traditionally done well as inflation rises and late-cycle economic expansions help support demand.
Due to their close ties with the commodities market, the materials sector are susceptible to cyclical demand and volatility in raw material and energy prices. While the sector’s sensitivity to business cycles can expose investors to greater risks, the area may also offer attractive returns during periods of strong growth.
“Spending was dominated by the industry’s largest companies with just the top 10 companies were responsible for over $1 of every $5 spent on exploration – mainly for copper and gold – worldwide last year,” according to Mining.com.
Investors will have to keep a close watch over China, the largest producer of steel, which made up half of the 1.6 billion metric tons produced last year. Beijing has cut back production after the international community accused Chinese producers of dumping excess products on the global market.
“SNL points out that the low level of exploration at earlier-stage projects in recent years, it is no surprise that initial resource announcements have been declining,” according to Mining.com.
For more information on the miners sector, visit our metals & mining category.