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Quarter-End Insights

Our Outlook for Basic Materials Stocks

With demand weakening, input cost relief is the only hope for many basic materials companies in the first quarter of 2012.

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  • The outlook for the next long-term highway bill has gotten slightly more positive in the last three months, but our politicians still have a lot of work to do before the current continuing resolution expires in March 2012.
  • Easing in raw-material cost inflation is the main hope for earnings improvement at many chemical companies in the early part of 2012.
  • Persistent weakness in developed-market economies' demand for metals throughout 2011 put the onus on China to boost demand and prices for iron ore, metallurgical coal, and copper. Now that we see mounting signs of weakness in Chinese real estate markets, it's possible that the one leg of metals demand that had been relied upon for the past several years is finally beginning to shake.

 

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Elizabeth Collins has a position in the following securities mentioned above: WY, CCJ, MT. Find out about Morningstar’s editorial policies.