Forming globally, the opinion of local commodities seems to be negatively growing as the awareness of its irreparable decline increases. In spite of this, shareholders who maintain a varied approach still stand the chance to make profits, increase value in findings and extract powerful and meaningful deposits. In order to secure success within the commodity sector, investors need to focus on long term values whilst remaining varied in their approaches.
Presently, commodity shares are declining in value and worth, and for all people relevant this is happening at a scary tempo.
Presently shares are declining in value and worth due to expectation of negative factors building in hype within the mining sector. At the moment commodities deriving from South Africa are being negatively observed and miners working with gold are seen as high-priced and risky due to long-drawn-out labour disputes. South Africa’s mining sector has definitely been experiencing heavy labour mostly threatening platinum producers. Another common denominator linked to this equation is that of capital spending being over stretched.
Risk in mining is evidently growing and in order to overcome this it is imperative to determine and understand exactly how close to the edge parts of the mining sector are. At this point returns from commodities for South African equities have declined dramatically and the level of reduction can become extreme. Reasoning for these mining commodity declines point to 2 factors –
- Broad commodity price risk (supply demand, stockpiles, cost to transport, etc.)
- Domestic SA commodity share risk (local currency, labour, national politics, electricity, etc.)
It is in situations as such that traders / investors operating within the market respond destructively and rapidly to these mark downs resulting in prices pushed too far.
Two endings can result – since shares have by this time moved in expectancy, the decline rate of underlying commodities could ease off / minimise OR companies will restructure due to the incurable point reached.
Commodity price declines like we are experiencing today will result in increased unemployment with a greater loss in jobs at the mine level.