Caterpillar (NYSE:CAT) to Battle Joy (Nasdaq:JOYG) and Bucyrus (Nasdaq:BUCY) in Mining Shovels Segment

After being out of the mining shovel business for several years, Caterpillar Inc (NYSE:CAT) announced it's going to enter the segment again, competing directly with market leaders Joy Global Inc (Nasdaq:JOYG) and Bucyrus International (NYSE:BUCY).

There is no doubt this category will be strong for years, as inflationary monetary policies will drive up the cost of raw materials, and emerging markets hungry for them will be pay the price to land them.

That means mining equipment like mining shovels will be hot for some time to come, as the bull commodity market continues on its long journey.

Printing money around the world has resulted in a number of currencies being debased, especially against gold, which also works strong with other commodities as well.

That means raw materials in general will continue to go up in price, generating spending from miner companies on the equipment to make them more efficient.

Confirming this is data from Bernstein Research, which says capital expenditure by mining companies will increase to record highs in 2011, growing to an estimated $113 billion. That would break the prior record of $110 billion.

The positive factor for Caterpillar and others in the industry, is this should continue to be a healthy and vibrant industry even if Western countries continue to falter, as the major growth is in emerging markets, which are going to, for the most part, continue to grow, even if the pace slows down some.

Demand for raw materials isn't near to playing out, and there will be years of robust growth and demand before it starts to level off.

Mining equipment will be among those ancillary industry profiting from that growth.

Goldman Sachs (NYSE:GS) said they see the overall expansion plans of Caterpillar to boost the sales for the company by 15 percent in 2011 and 10 percent in 2012.

BHP (NYSE:BHP) Wary of Short Term Global Economic Outlook

BHP Billiton (NYSE:BHP) said in a recent production report they are wary of the short-term outlook for growth, especially in mature markets, with European nations putting austerity measures in place to combat the sovereign debt crisis.

Prospects in the United States aren't looking good, and China is taking measures to combat their urban property crisis, which has overheated in a big way.

China will continue to grow, just at lower levels than the recent past, contrary to a few recent reports they're going to allow the property market to go forward as it was. That's just wishful thinking and attempts to get investors to put their money in dubious companies and funds.

BHP said this in their production report, "Uncertainty surrounds the near-term prospects for growth in the developed world as governments adjust fiscal policies following a period of significant stimulus and subsequent increase in sovereign debt levels. Within China, measures introduced to reduce growth to more sustainable levels means volatility in commodity end-demand is likely to persist. BHP Billiton sees these measures as a normal continuation of China's economic management policies,"

In other words, over the short term there is very little to bring optimism to the demand factor of a number of raw materials, and that's going to show in the results of companies like BHP.

While we'll see some good quarterly reports for the last quarter, like with Freeport-McMoRan (NYSE:FCX), that was based on commodity prices last quarter. Since then a number of metals and other commodities have fallen, and that's pointing to a tough quarter next time around.

Freeport-McMoRan (NYSE:FCX) Pummeled on China Index

With the China Purchasing Managers’ Index falling from 55.7 in April to 53.9 percent in May, raw material companies like Freeport-McMoRan (NYSE:FCX) will be under pressure, as before we really get going in some significant activity we're already facing a slowdown.

Analysts had been looking for 54.5, showing the possibility that China was going to slow down is a reality, and questions as to how slow they're going to end up is in the air and concerning the markets.

This comes from the growing inflation in China, which they're fighting by raising interest rates and regulating parts of the property industry.

We'll probably see the market punish some raw material companies like Freeport was today, where they plunged by $3.56 to $66.49 a share, dropping 5.08 percent.

BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale (NYSE:VALE) and Iron Ore Demand from China

As China implements measures to cool off its economy, iron ore producers like BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Vale (NYSE:VALE) are starting to get concerned on how it will impact the demand for iron ore from them.

Many raw materials companies have the same concerns, as many have been counting on increasing demand from China to help them through these slow economic times.

Just last month iron ore prices stood at two-year highs of $184.80 a ton, and now has dropped to $169.5 a ton in that short time.

The major element going forward is whether or not decreasing supply from India because of the monsoon season will offset the lower demand in the market.

Consequently, depending on which you believe to be the case, iron ore prices have been projected to drop as low as $150 a ton or rise to over $200 a ton by the summer.

Jim Rogers: Put Money in Real Assets

If you follow investor and commodity expert Jim Rogers, you know he has been recommending investors put their capital in real assets for a long time, and in light of the European sovereign debt crisis and China inflation challenge, Rogers again reiterated that in an interview on Bloomberg today.

The primary reason for this advice from Rogers is "because paper money everywhere is being debased.”

Governments and central banks around the world haven't stopped their printing of money, and continue to spend as if there are no consequences to their actions.

Smart investors know the more you print, the less value the currency holds, and inflation will be inevitable down the line. Only holding real assets will help investors maintain their wealth.

Occidental Petroleum (NYSE:OXY) Drops on Inflation, EU Fears

Occidental Petroleum (NYSE:OXY) fell, along with other energy and commodity companies, as increased inflation in China and major concerns over the fallout from the sovereign debt crisis in Europe, and whether or not the almost $1 trillion will do much to stop it, has investors wandering if demand can hold up under these economic circumstances.

With austerity measures tied to the sovereign debt bailout of some European countries, along with China battling inflation and attempting to ward off a potential bubble, thoughts are demand will start to decrease for raw materials, and adding Europe and China together could result in significant cutbacks, which could devastate countries and companies counting on Chinese demand to grow their economies.

One positive Occidental Petroleum does have in general, is they have no exposure in the Gulf of Mexico, which could have created many headaches and problems for them.

So while demand is a major issue going forward, at least they can focus primarily on economic issues and not legal ones, along with uncertainty about the future off deepwater, offshore oil drilling.

Occidental does have some offshore exposure, but that's in working with Libya and Qatar, but in the Americas it's all onshore drilling, which makes them a more predictable company than those with major offshore exposure at this time, especially those in the Gulf.

Alcoa (NYSE:AA), Century Aluminum (Nasdaq:CENX) Down on China Concerns

Alcoa (NYSE:AA) and Century Aluminum (Nasdaq:CENX) are down today as concerns over growing signals from China they are going to continue tighten fiscally has raw materials companies and investors concerned over the demand factor.

China has been raising interest rates can regulating their housing market in order to cool off the economy, which has become in danger of becoming a bubble that bursts.

Every commodity sector used for construction and building materials will be under pressure until the measures China takes, and their width and depth are more clear.

US Steel (NYSE:X) Promotes Marc Stoken to General Manager Raw Materials

US Steel (NYSE:X) announced it named Marc Stoken as general manager of raw materials for the company.

The position of general manager in the unit includes managing the North american operations of U.S. Steel for purchasing raw materials for the company in the region.

Stoker had been manager of strategic materials for U.S. Steel since 2004. He's been with the company for 34 years.

Credit Suisse (NYSE:CS) Issuing $66.6 Million in Structured Notes Linked to Commodities

Credit Suisse (NYSE:CS) announced it will be issuing $66.6 million in structured notes which will be linked to the commodities futures index - Standard & Poor’s GSCI.

The GSCI is a benchmark index of 24 raw materials.

Parameters of the structured notes are they will have a floor of 5 percent and a ceiling of 17 percent. Those are guaranteed as long as the index doesn't fall by over 20 percent from the level started at.

J.P. Morgan (NYSE:JPM) is handling the sale of the notes.

Aluminum Corp. China (NYSE:ACH), Rio Tinto (ASE:RIO) Partnering

Aluminum Corp. Partners with Rio Tinto on Guinea Project

Forget about the tensions that have been seething under the service over the last year between Australia and China, as demand for raw materials is changing their relation positive again as Aluminum Corp. China (NYSE:ACH) and Rio Tinto (ASE:RIO) are partnering in a Guinea project.

With Rio Tinto short on cash to develop their properties in Guinea and Mongolia, they are partnering with Aluminum Corp. to get access to capital in order to forge forward faster.

The Guinea mine will be co-developed by the two companies in the new partnership, with Chinalco taking a 47 percent stake in the venture.

MarK Mobius: China Growth is Sustainable

Mark Mobius on China Growth

Mark Mobius was talking at the Reuters Mining and Steel Summit on the future growth of China and whether he believed it was sustainable or not. The emerging market expert said while China will continue at high growth levels and it will be sustainable, it won't be able to continue at double-digit growth levels, but will probably continue on some time in higher single-digit growth.

This ensures raw material demand will continue to be high based on China alone, according to Mobius, and I would add it shows the long-term demand cycle we're in when taking into account all emerging nations, and to a lesser degree, developing nations as well, who will benefit from selling commodities.

Contrary to the idea China will be tightening up, Mobius looks at them continuing to to pursue raw materials no matter what they do with their currency. Taking into account Chinese concerns over economic conditions in the United States and the rest of the West, and you can see they know exports are going to take a long time to rebound, making their internal needs and domestic projects as important as ever. This doesn't mean there won't be decent exports, just that they'll take time to build up to pre-recession levels.

Some of the larger and safer emerging market investments Mobius mentioned as good plays were Compania de Minas Buenaventura SA (NYSE:BVN), Vale (NYSE:VALE) and PetroChina Company Limited (NYSE:PTR).

Mark Mobius on China Growth

Citibank (NYSE:C) Growing Commodities Unit

Citibank Commodities Unit

Citibank (NYSE:C) is looking to its investment banking division for growth, specifically its commodities unit, which it is focusing on expanding in the near term.

Raw materials and agriculture should be strong sectors for many years, and even with the alleged move by China to tighten its monetary policy, that could be a ploy as it negotiates across a number of sectors for raw materials it needs desperately.

One for sure is iron ore for the steel industry in China, which is booming and a major export for the country.

Precious metals are another sector which China will have great demand for in the years ahead.

With the pressure to cut back on fees in relationship to consumers, banks like Citibank are looking outside of retail banking for growth sectors, and commodities afford some of the best opportunities in the years ahead, even though there could be a lot of ups and downs on the road.

Citibank Commodities Unit

Teck Resources (NYSE:TCK) Drops on China Inflation

Teck Resources China Inflation

The news that inflation had reached a 16-month high in China February, had a strong effect on the prices of metals, and Teck Resources (NYSE:TCK) partook in the negative response, getting rocked with a 1.4 percent hit to its stock price.

Many metals fell on the China inflation news, primarily on concerns China will tighten its monetary policy to cool of its economy even more, which would imply demand for raw materials could drop from what was expected.

Teck Resources is one of the largest base-metals producers in the world, and could get rocked if China cuts back in a big way, although that's not a certainty, although it would be more costly to do business there.

Teck has somewhat of a cushion though, as only 10 percent of its overall revenue comes from Asia, making them not as vulnerable as some other metals producers could be.

Teck Resources China Inflation

Citigroup (NYSE:C) Expanding Commodities Business

Citigroup Commodities Business

Looking to commodities as a serious growth sector, Citigroup (NYSE:C) will be hiring and preparing for expansion in the unit over the next three years, increasing the number of traders or bankers in the division by about 40 percent. At this time they employ about 235 people, with plans to grow that to 335.

Of particular interest in the unit is to build out what global head of commodities for the company, Stuart Stanley, calls "a client-facing oil business."

Along with oil, Stanley is looking to the natural gas and metals sectors to target as well going forward.

Part of the strategy of Citigroup will be to build up scale in a number of raw material sectors to compete strongly in the lucrative commodity market.

Citigroup Commodities Business

Rio Tinto (LON:RIO) and Raw Materials in Big Gains

Raw Materials Producers

Those companies producing raw materials experienced strong gains as companies like Rio Tinto (LON:RIO) and BHP (ASX:BHP) enjoyed stong surges in price.

This was also reflected beyond commodity companies and raw material producers, as the London Metal Exchange Index increased by almost 2 percent, and crude oil for March delivery increased by 0.4 percent.

A number of oil exploration companies moved in synch with the index movements and other raw material upward price movements as well.

Raw Materials Producers

Jim Rogers Points to Agriculture, Silver and Palladium as Good Commodity Investments

While most of us that know Jim Rogers are familiar with his bullish outlook on agriculture, but he has been slow to add anything else to what he thinks will be big movers, other than saying all commodities over time will rise as demand from emerging middle classes in Asia drive up the prices.

But he has broken with his generalities to give his thoughts on what other specific commodities look good in the short term, and they are silver and palladium.

I do know a lot about silver and know that has a great short- and long-term future for prices going higher. But palladium I'm not as knowledgeable about, and so it was good to hear Rogers mention it, as it will get me to do some research to see why he's bullish on it now.

Rogers major reason for overall commodity bullishness is the demand factor from Asia, but also the fact that expansion of commodity production capacity has been almost zero, and so the supply will not be able to meet the demand, so commodity prices will continue to rise.

Commodities Rise on Dollar Collapse

As the U.S. dollar continues to plunge in value, commodities and stocks related to commodities continue rise in price, as investors flee the greenback and look to energy, raw materials and related stocks to hedge against its continuing demise.

Also benefiting from the fall of the U.S. dollar are multinational companies, which are also targets of investors. Of course foreign manufacturers are getting nervous, as their products are costing more with the collapse of the dollar, and they lose sales as their price competitiveness in America declines.

Most believe the stock market will remain volatile for some time, and will largely move in conjunction with the ups and downs of the U.S. dollar, which means it'll probably move up as the dollar over the long term moves down.

Taking into account the flight to safety and hedge against inflation, along with the ongoing collapse of the U.S. dollar, and the emerging middle classes in China, India, and other places in Asia, and you can see why commodities will continue to soar for years into the future.

Commodities | Raw Materials Down in 2009?

A recent report from the Economist Intelligence Unit (EIU) says that industrial commodities will probably continue to fall in 2009 as the price index is projected to plunge by up to 41 percent this year.

On the other hand, in 2010, expectations from the EIU report says prices of the majority of industrial raw materials should bounce back in at least a limited amount in prices, although in the long term most investors and futures traders are positive about the return of the bull market in commodities.

In the auto industry, that continuing decline will cause natural rubber demand to fall even more, as synthetic rubber becomes more competitive in price (that'll last as long as petroleum prices remain down), and platinum, while expected to fall in demand in 2009, possibly pressuring platinum prices and futures down, there could be an override there from investors speculating.

The recent announcement that Indian consumers are migrating from gold to platinum may offer some support in 2009 as well.

Obviously gold and silver futures and prices should enjoy a solid year in 2009, as investors continue to look for the few places of safety available, as confidence in the U.S. slides as investors start to understand forced liquidation propped it up when it should have been falling, and now they're starting to flee it as they see the fundamentals and huge bailouts will continue to undermine its strength.

Availability of credit in the latter part of 2008 and early part of 2009 have also affected the movement of commodity stocks as financing has held back acquisition of raw materials in many cases and many companies.

Cutbacks by producers has also generated the possibility that supply may be more difficult to acquire this year, putting more pressure to meet demand and move the stock prices higher. Shortages could be a reality with some raw materials in 2009.

Demand for metals in the consumer electronics sector has also left demand down, and so prices are expected to be pressured down for metals used there too.

The one unknown question out there is how far along companies are in forced liquidation. If their positions are mostly unwound, base metals may be a little stronger than expected, although most aren't holding out much hope for 2009, and are looking for 2010 for the beginning of a modest recovery.

Some companies may have enough cash and credit lines available to tap, and so may do well, others probably will take longer, the reason its such a mixed commodity futures market at this time, and investors are being cautious.

That's also a factor with the U.S. dollar, which will assuredly contract and collapse some this year. Again, the U.S. dollar has benefitted from forced liquidation because of commodities being sold to raise capital which has artificially kept the U.S. dollar strong because of most commodities being dollar denominated.

With the ongoing recession across the world, there's little hope that oil prices and futures will rise any time soon, a reason the super contango has been helping the pocket books of those investing in it.

Investors are simply buying and storing oil in supertankers until prices start to move again. Their hope is obviously the storage costs won't outpace the price increase, however incremental they may be.

Because it's a super contango, the futures are much further out than normal, and investors can more easily make those decisions.

Although it's not quite here yet fully, the commodity market, as far as gold and silver goes, is starting to behave somewhat predictably again, as investors run to a haven of safety with their capital.

Other industrial raw materials and futures will struggle to go up this year in any meaningful way, and we can expect this behavior for the rest of 2009.