Investors interested in metals should look toward metals like tungsten and antimony, or base metals like lead and zinc. Those are the areas where there's a critical shortage of product and a deficiency in the construction of additional mines over the last 10 years. But if one is looking to get the most out of an investment this year, I would suggest exploring Zinc or Aluminum as investments. Either of the two may have the best possibilities for growth this year.
The zinc market has been waiting for the re-acceleration of the Chinese economy and it looks like the fourth quarter could have been the match to get it burning. Construction and heavy industry looks good. As it grows, expectations are that usage should match or exceed historical usage. 2013 is expected to see healthy global increases but mine supplies will not keep up with consumption for the next five years. The market is currently in surplus, so it will take time for demand to catch up. Zinc production is expected to fall as some of the biggest mines in the Western world are expected to shut down over the next couple years. Not expecting to be replaced, if the economy continues to improve, demand might out pace supply, which could raise prices making it a good investment. Southern Copper Corp (SCCO) and Teck Resources Limited (TCK) are two large mining companies that extract zinc that both have performed well through mid January and since have looked like they have peaked.
Tungsten prices have been on the decline until mid 2010 when they started to rise. It has steadily hovered around $320.00 range since September of 2012 and is still at healthy price levels as we move into slow economic improvement. The metal is well known for being used commercially in the lamp industry. Specialty lamps such as those for video camera lights, airport runway markers, medical equipment and fiber-optic systems also use tungsten. It is also used to make steel stronger and applicable for tools and construction. One problem is financing for construction projects. It has been difficult to find financing; so many projects have been put on the back burner. But prices are still good and may remain that way unless China really loosens its exports.
The Nickel industry is not one to look to in 2013. It is in a prolonged slump with fundamental weakness through this year, supplies are expected to continue to outpace demand and China, a global industrial giant, will be less interested in this metal in 2013 than in 2012 so prices will remain low. It is primarily used in stainless steel and magnets.
Aluminum might be a good investment in 2013. The industry is looking for solid demand from the auto industry. With a global supply glut presently, production cuts by BHP Billiton (BHP) and Rio Tinto (RIO) are expected to reduce global supply. The outlook for the metal varies depending on what one reads. Citicorp believes growth will be an unimpressive 1.3% through 2013 because of the uncertainty of Europe and we have yet to see if China can sustain the growth from the slow down it was experiencing. Alcoa (AA) has an even brighter outlook for the metal (although this would be expected). Claiming strong demand, it forecasts growth levels at 7%, up from 6% in a revised forecast. Aluminum could be the investment vehicle to go with. The continued transition by the auto industry to aluminum instead of steel because of weight concerns (and miles per gallon) will continue to grow. The aerospace industry will also continue to play a major role in the demand for the lightweight metal.
Growth as a whole in 2013 is not expected to set any records. Many economists are predicting another year of sub-par growth. In fact, the latest predicting is a slight contraction from last year. We grew by 2.2% in 2012 and 2013 is expected to come in slightly less as growth crawls in at 2% for the year-not very impressive numbers. So if one is interested in exploring metals to invest in, take a more in depth look at zinc and aluminum.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.