Building a business around commodities such as mining for iron ore might not have the appeal of starting up a tech company, but the commodities business sure is profitable when you are one of the biggest players in the space.Mining and other operations in the commodities business are extremely capital intensive, which makes it that much harder for smaller companies to gain a foothold in this business.
All commodities are a cyclical business. A couple companies could become overly ambitious and bring on too much production capacity, or slower, weaker economic output could reduce the appetite for certain products. Conversely, there are largely no substitutes for these products so they will always be in demand to some degree. Recently, slowing demand growth in China has reduced the market for major commodities such as iron ore and copper even as many companies are bringing on new mines, thus creating an oversupply of these materials.
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With the market in the middle of a down cycle some companies will suffer much more than others, and those that generate large profits today will likely survive the downturn and look even better when the market rebounds. In this vein we have put together a list of the 10 most profitable companies in the commodities business. We have excluded oil companies from this list, because if included they would take eight of the top 10 slots,and they deserve a list of their own.
The article 10 Most Profitable Companies in Commodities originally appeared on Fool.com.
Tyler Crowe owns shares of BHP Billiton Limited (ADR).You can follow him at Fool.com under the handle TMFDirtyBird, onGoogle+,or on Twitter@TylerCroweFool. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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