Basic Materials
Candlefocus EditorThe basic materials sector is a globally critical industry, as raw materials produced by these companies are used in nearly all other sector industries. Raw materials extracted and processed by these companies are also necessary inputs for many developing countries. However, since basic materials are essential to the production of most goods and services, the industry is often highly sensitive to economic cycles. During economic booms, demand for natural resources typically increases and drives up the revenue and profits of companies in the sector.
Moreover, basic materials companies tend to be large and spread across many countries because of the vast land and resources they need to extract raw materials. These big companies usually have a significant foothold on the economies of their host countries, since their businesses have a direct effect on employment, industry, and production. For example, if gold mining is a major industry in a particular nation, then the gold-producing company will have a great influence on local job markets.
The sector also tends to contain many specialized companies. For example, among the most specialized companies in the sector are those involved in hydraulic fracturing or fracking, which is the process of extracting oil trapped in impermeable rock layers. This process requires advanced technologies and equipment, and is often highly regulated by local and national governments.
In summary, the basic materials sector contains a diverse array of companies, from traditional mining and oil companies to new, more specialized companies. These companies are critical for nearly all industry sectors and have a significant influence on the economies of their host countries. Their businesses are, however, very sensitive to economic cycles, making their profits and revenue highly volatile.