Global crosscurrents, including the conflict in Ukraine, are creating near-term pressure on various commodities and materials. However, investors shouldn't think of these as just near-term issues that could go away. Instead, the world is likely to have a fundamental rethink about who buys what from whom.
Therefore, it makes sense to consider what companies could be affected by the potential shift in demand patterns. In this context, copper miner Freeport-McMoRan (FCX +5.57%), steelmaker Nucor (NUE +0.95%), and U.S.-listed South African precious metals miner Sibanye Stillwater (SBSW +14.68%) are worth a closer look. Here's why.
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Freeport-McMoRan, the best copper stock
It's no secret that the conflict in Ukraine sent industrial metals prices soaring, and it also led to a rise in the price of gold as investors sought so-called safe-haven investments. Freeport-McMoran is primarily a copper miner (3.8 billion pounds in volume in 2021), and it also has assets in gold mines (1.4 million ounces).
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However, Freeport-McMoRan is much more than a short-term tactical play to protect your portfolio. It will take time for the global economy to adjust to the consequences of the war. Ukraine is a major producer of copper wire harnesses, and the lack of production due to the conflict has already caused carmakers to make production halts. As a result, alternative producers will have to source more copper.
Meanwhile, the long-term case for the stock rests on increased demand for copper from the transition to electric vehicles and renewable energy. At the same time, global supply could be constrained due to the difficulty of obtaining permits and political developments in Peru and Chile. Meanwhile, Freeport-McMoRan is well-placed with significant, productive assets in Indonesia and the United States.
Sibanye Stillwater, a speculative precious metals stock
Definitely one for the more speculative investor, this South African precious metals miner produces platinum, palladium, rhodium, other metals, and gold. Russia produces around 40% of the world's palladium with South Africa being the only other major producer holding a similar market share. Palladium is an essential metal used in the semiconductor industry and, more importantly, is an element in catalytic converters in vehicles.
Consequently, there are fears that potential supply constraints and soaring prices will lead to production curtailments at carmakers. However, everything points to the possibility that South African palladium will benefit from increased demand in the future. That would be good news for Sibanye Stillwater.
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Still, potential investors should note that the miner is based in South Africa and suffers from a recent history of labor disputes, difficult relationships with unions, and strike actions. As such, there's a lot of stock-specific risk around this company. However, assuming management can sort out its labor issues, then the combination of upside potential from increased precious metal demand and the stock's whopping 8.3% dividend yield makes it look attractive now.
Nucor, a top steel stock
The onset of the war sent steel prices soaring, to the benefit of steelmaker Nucor in 2022. Russia and Ukraine are both major steel exporters. Russia is facing stiff sanctions and economic isolation, while Ukraine has seen damage done to one of Europe's largest steel plants.
NYSE: NUE
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This is not the place to speculate on what might happen next -- suffice it to say that the uncertainty and ongoing global geopolitical pressures could create favorable conditions for Nucor. The U.S. steel company has operating facilities in the U.S., Canada, and Mexico. If there's an increase in protectionist tensions resulting from the conflict, then Nucor is likely to be a beneficiary.
