August 17, 2017 | Vanadium prices have gained since mid-July on tightening supply in major producer China. Roskill’s Jack Bedder offers insight on the market. … Read MoreGet Vanadium Stock Investor Kits
August 9, 2017 | Hedge fund Senrigan Capital Management is questioning the $2.5-billion equity raising, saying it is unfair to minority shareholders. … Read MoreGet Coal Stock Investor Kits
August 3, 2017 | Several aluminum smelters are expected to come online, restart or ramp up production. … Read MoreGet Aluminum Stock Investor Kits
Industrial metals such as aluminum, tin and metallurgical coal are key for much of the technology and infrastructure used in our daily lives. From aircraft frames to everyday appliances, industrial metals are everywhere, and industrial metals investing is growing increasingly popular.
Metallurgical coal, or coking coal, is different from thermal coal, which is burned to produce electricity. Coking coal is a key component in the steelmaking process. There is no substitute for the material, although steel recycling could blunt demand for coking coal in the future.
There has been plenty of oversupply in both the thermal and metallurgical coal spaces as of late, and that has driven prices down. However, American President Donald Trump is pushing to reignite the US coal industry, and some market watchers believe a brighter future for coal could be coming.
Meanwhile, prices for aluminum look set to move higher on the back of growing demand and restrictions on output in China. An ongoing trade probe to investigate whether Chinese aluminum imports pose a threat to US national security could also impact the market and prices moving forward.
Chromium, molybdenum and vanadium are also industrial metals. They all improve the properties of steel, but have other applications as well. Molybdenum is used in steelmaking as it has good tolerance for high-heat and high-stress situations, but it is also used by oil companies as a catalyst to remove sulfur from crude. Vanadium is used to strengthen steel, but is also used in vanadium-redox batteries, and some see vanadium demand increasing due to this application in energy storage.
To be sure, there’s a long-term need for industrial metals, and for savvy investors the space could provide plenty of opportunity.
Industrial metals investing options
While there are plenty of options for investing in precious metals like gold and silver, industrial metals investing is a little more challenging. It’s not common for investors to physically own industrial metals, and most market participants instead choose to invest in these metals via futures contracts. For example, aluminum, tin and molybdenum futures are all available to trade on the London Metal Exchange.
Investors can also buy exchange-traded products that track industrial metals. Some are specific, such as the iPath Pure Beta Aluminum ETN (ARCA:FOIL) and the VanEck Vectors Coal ETF (ARCA:KOL), while others, like the iPath Bloomberg Industrial Metals Total Return Sub-index ETN (ARCA:JJM), are more diversified.
Finally, investors can buy shares of companies that mine or explore for industrial metals. Some investors feel safer investing in larger, more stable companies, while others prefer to put their money behind smaller producers, developers or even juniors. Doing due diligence is a key part of this type of industrial metals investing, and it is important for each investor to know their risk tolerance.
This description was last updated in July 2017.