by Justin Dove, Investment U Research
Last week, David Fessler wrote about the British Geological Survey's 2011 Risk List. He highlighted some of the bigger miners that are benefiting from shortages and monopolies in supply. Companies like BHP Billiton (NYSE: BHP), Vale (NYSE: VALE), Rio Tinto plc (NYSE: RIO) and even Molycorp (NYSE: MCP) certainly stand to capitalize on growing demand and shrinking supply.
But a couple of the metals near the top of the risk list may also offer some hints at smaller companies to watch – in particular, antimony and niobium.
Antimony, Antimony, Antimony
Say that three times fast…
Antimony is a little-known metal used in the manufacture of fire-retardant material. It's not extremely pricey or rare, but 90 percent of its production is controlled by China.
As we've seen with many rare earth metals, China won't hesitate to restrict exports and manipulate a market. They've already done so regarding antimony twice between 1974 and 1998.
(Courtesy: USGS)
The USGS explained three of the spikes in the above graph.
- 1970 – High demand and short supply worldwide, resulting in a price spike.
- 1974 – High demand and short supply from China, resulting in a price spike.
- 1994-95 – Severe short supply from China, resulting in a price spike.
So just as companies spring up to combat Chinese monopolies in rare earths, expect mining companies to focus more on antimony going forward.