Miner cost cutting to continue, Cowen Says

Big miners are rallying today as China’s economy shows signs of life but Cowen analysts warn it would be foolish for investors to assume that commodity prices will soar back to their previous levels, if only because mining companies have been cutting costs as if they expect prices will stay low.

The rush to cut costs has been felt the hardest by mining-industry suppliers, including Caterpillar (CAT -0.1%) and Joy Global (JOY +0.9%), Cowen says, because cancelling orders for new equipment is one of the easiest ways to cut costs.

Among S&P 500 mining stocks, FCX +2.9%, CNX +2.6%, NEM -0.2%.

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Comments (2)
  • nemonemo
    , contributor
    Comments (341) | Send Message
    That analyst needs to take Economics 101 class and what demand and supply means.
    3 Sep 2013, 04:28 PM Reply Like
  • jamerson
    , contributor
    Comments (55) | Send Message
    The analyst is correct as far as speculation can push demand, and supply is cut to maintain price structure. CAT is the perfect example, FORD is the poster child. They closed more plants in the last three years than Radio Shack. I refer to CAT because through like consolidation, they keep prices high for structural expense. Likewise, FORD cut supply overseas by closing plants, but never opened up Detroit. Henry Ford thought it was right to offer a car that anyone who worked for Ford should by principle be able to afford to buy a Ford. I doubt that that principle now.
    3 Sep 2013, 11:24 PM Reply Like
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