Chicago, IL – September 1, 2010 – Today, Zacks Equity Research discusses the Metals & Mining, including ArcelorMittal (MT), Ford Motor Company (F), Toyota Motor Corporation (TM) and Honda Motor Company (HMC)
A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/39577/Metals+and+Mining+Review+-+Sept.+2010
The Metals & Mining Industry encompasses the extraction (mining), as well as the primary and secondary processing of metals and minerals such as aluminum, gold, precious metals, coal and steel. The industry is oligarchic in structure, with a few producers accounting for the lion’s share of the output. The largest segment of the global metals market is iron and steel, followed by aluminum.
The iron and steel segment comprises more than half the industry in terms of volume. This industry includes metal ore exploration and mining services, iron and steel foundries for smelting, rolling, forging, spinning, recycling, stamping, polishing and plating of iron and steel products such as pipes, tubes, wire, spring, rolls and bars. Luxembourg-based ArcelorMittal (MT), the world’s largest steel producing company, produced 73.2 million tons in 2009, representing 6% of the world's steel output.
The precious metal and mineral industry consists of companies engaged in the extraction and primary processing of gold, silver, platinum, diamond, semi-precious stones, uranium and other rare minerals and ores, along with the cultivation of pearls. Anglo American Plc., the largest gold producer by market capitalization, dominates the gold industry.
Historically, the automotive and construction markets have been the largest consumers of metals, accounting for more than 50% of total demand. Other metal consumers include energy, electrical equipment, agricultural, domestic and commercial equipment and industrial machinery. Large automakers such as General Motors, Ford Motor Company (F), Toyota Motor Corporation (TM) and Honda Motor Company (HMC) are big consumers of metals, chiefly steel and aluminum.
Outlook
The global metal industry is cyclical, highly competitive and has historically been characterized by overcapacity (excess of supply over demand). Metal producers are subject to cyclical fluctuations in London Metal Exchange prices, general economic conditions and end-use markets. Individual company profitability depends on volume and operating efficiency. Large producers with huge resources are able to discover, develop new deposits and boost reserves, while smaller ones own few mines and concentrate on them.
Mergers and acquisitions (M&A) has historically been a critically important growth strategy for metal companies. While the slow economic recovery is a significant factor in short-term decisions regarding M&A activity, mining companies expect to make acquisitions over the next three years. The M&A activity is also supported by higher metal prices that have strengthened the financial positions of many mining giants.
Geographically, the Asia-Pacific region is witnessing higher production and consumption of metals, especially China and India. Per capita consumption levels in both these countries are calibrating to U.S./European levels, which could -- theoretically, at least -- double metal demand in the longer term. In recent years, capacity growth in China has significantly exceeded the growth in market demand. A continuation of this unbalanced growth trend or a significant decrease in China’s rate of economic expansion could result in the country increasing its metal exports.
Yet, we expect global metal demand to improve in the long term with the recovery of user industries. Developed regions such as the US and Europe are showing signs of recovery. Despite some concerns about its sustainability, China is expected to remain the largest consumer of metals in the future.
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FORD MOTOR CO (F): Free Stock Analysis Report
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TOYOTA MOTOR CP (TM): Free Stock Analysis Report
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