We recently published a list of 10 Worst-Performing Industries in 2024. In this article, we are going to take a look at where mining and metals industry (excluding gold and silver) stands against other worst-performing industries in 2024.
Several market-influencing factors are at play in 2024. These include policy easing by central banks around the world, falling commodity prices and multiple tech subindustries exiting the 2020-22 hype mania.
Other factors include the consistently growing investor/consumer focus on sustainability, slowing economic growth in China and a volatile geopolitical environment in Europe and the Middle East. These factors have put several industries on a path to recovery, while others on a long-term decline, yet others still in uncharted waters.
The fed cut rates in September by 50 basis points, which was welcomed by Wall Street as a positive signal towards a much anticipated soft landing. Following the cut, the broad market jumped 1.7%, on average, in one of its best days in the year, surpassing its last all-time high in July.
Some analysts, like Rob Rowe, expect the Fed to cut rates by at-least 25 basis points at each meeting through the rest of the year, further boosting investor confidence. The policy easing is expected to boost industries struggling due to a challenging borrowing environment.
However, some industries are likely to keep struggling due to their dependence on commodity markets. These industries are likely to suffer from overcapacity and weak demand. Commodity prices are sensitive to growth in China, whose economy grew 5.2% in 2023. Adjusted for low activity in 2022 due to lockdowns in the country, the 2023 growth was actually slow, and it is expected to slow further to 4.8% in 2024 and 4.5% in 2025, based on IMF forecasts.
On the other hand, industries that have a negative impact on the environment are on a long-term decline in their core business. This is leading to growing investments by the companies in these industries in recycling, carbon-capture technologies and renewable energy.
Best-Performing Industries in 2024
A challenging borrowing environment hasn’t stopped some industries from posting high gains in 2024. Two of the prominent ones include Semiconductors and Precious Metals. Based on the ETFs exposed to the industries, they’ve gained 45% and 37% YTD, respectively.
The demand for semiconductors is mostly driven by growth in AI, which, unlike many tech subindustries, is the only one that survived the 2020-22 hype mania. The industry posted trailing-12 month gains of 54%, based on a Roundhill Investments ETF we tracked exposed to companies at the bleeding edge of AI research in both hardware and software.
On the other hand, precious metals have outperformed the broader market so far owing to fiscal instability, geopolitical volatility and de-dollarization, even as the luxury market suffers onslaught.
Also Read Top 20 Fastest-Growing Industries in the World in the Next 5 Years and 16 Most Profitable Industries in the US in 2024.
Methodology
For our list of the worst-performing industries in 2024, we ranked them on the basis of YTD returns of ETFs and in some cases, of stock indices exposed to the respective industries, as of October 25.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by Shane Cottle on Unsplash
Mining and Metals (Excluding Precious Metals)
iShares MSCI Global Metals and Mining Producers ETF (PICK): -5.62%
The mining and metals industry (excluding gold and silver) is in rough waters, with MSCI Global Metals and Mining Producers ETF (PICK) down by 5.6% YTD. PwC’s Mine 2024: 21st edition report shows the top 40 mining companies had an overall revenue and net income decline of 7% and 44%, respectively, in 2023, even as they increased production. This was on the back of falling commodity prices, softening demand in advanced economies and China and increasing operating costs. These trends have persisted so far in 2024 and are expected to continue.
The operational costs are increasing primarily because of fuel and power costs, in addition to the environmental regulations worldwide because of the mining industry’s environmental impact.
Long term, the industry’s challenge is urban mining. Given the sustainability initiatives around the world and consumers’ increasing awareness of their consumption’s impact on the environment, the future of commodities appears to be circular. In this regard, mining companies are adapting their business models to recycling, with a recent example being Rio’s 2023 purchase of a 50% stake in Matalco Inc, an aluminum recycler.
In the wake of interest rate policy easing in the US and other countries, the major global engines of growth are expected to increase demands for metals like copper, aluminum, and iron, among others.
Overall, mining and metals industry (excluding gold and silver) ranks 5th on our list of worst-performing industries in 2024. While we acknowledge the potential of mining and metals industry as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
