Basic Materials Industry
The basic materials consist of the following main groups of materials.
- Various types of metals, including iron ore, copper, steel, aluminum, gold, silver, palladium and many others;
- Timber and forest products;
Oil, natural gas and coal are also basic materials, but they belong to the Oil&Gas industry.
There are many countries relying in their prosperity on the sources of basic materials. For example, South Africa is known for its gold and platinum mines whereas Brazil and Russia have huge timber reserves.
Companies in the industry explore, extract and refine basic materials before delivering them to customers. It involves capital-intensive projects and current low interest rate environment is accommodative to them. Companies in this industry produce construction materials, paper, packaging products, glass, steel and many other products.
The prices of basic materials are determined by the supply and demand. Basic materials are the raw materials for a production of consumer goods. So, if the demand for consumer goods falls or rises, the demand for basic materials follows the route. The demand for consumer goods, in turn, depends on the health of the global economy. So, any possible major economic downturn makes companies in the basic materials industry less attractive to investors.
Sectors of the Industry
According to the Industry Classification Benchmark (ICB), Basic Materials industry consists of the following sectors.
|Forestry & Paper
|Industrial Metals & Mining
Iron & Steel
Diamonds & Gemstones
Platinum & Precious Metals