NEW YORK (TheStreet) -- As developing nations continue to prosper, grow and decouple from the Western world, the demand for certain alloying metals is likely to surge and drive up their prices.
There is a direct correlation with the demand for alloying metals and economic growth. In general, as economies grow, they consume and, hence, demand more alloying metals. Some of these metals, like aluminum, iron and copper are invaluable for building a modern economy due to their roles in the construction of key infrastructure.
Additionally, these metals are vital to the development and expansion of a nation's manufacturing sector. This was seen in 2009 as China's economy and manufacturing sector grew, forcing increased consumption and demand of copper, which further resulted in higher copper prices.
As for the coming year, developing nations are expected to be at the forefront of economic growth and will likely be the drivers of increased demand for these metals. Copper has positive fundamentals and is likely to see a market imbalance on the supply and demand side, resulting in a deficit in the metal, pushing prices up.
Aluminum is likely to see price support due to the general buoyancy expected in the base metal sector as well as improving demand.
As for iron ore, prices are likely to increase due basic supply and demand forces. Demand is likely to increase in both developing and developed nations, and supply is expected to remain relatively stable.
are the world's largest producers and suppliers of iron ore and are likely to benefit from these trends.
The following ETFs could also benefit from the overall expected uptick in alloying metals:
PowerShares DB Base Metal Fund
, which holds futures contracts in aluminum, copper and zinc. DBB closed at $21.23 on Wednesday.
iPath DJ UBS Copper TR Sub-Idx ETN
, which is an ETN that tracks the copper markets. JJC closed at $44.26 on Wednesday.
iShares S&P Global Materials
, which holds BHP and VALE in its top holdings. MXI closed at $59.30 on Wednesday.
As with most commodities, these metals can be volatile and carry risks. To help mitigate these risks, it is important to implement an exit strategy using triggers at price points that indicate an upward trend could be coming to an end.
According to the latest data at
, an upward trend in the mentioned ETFs could come to an end at the following price points: DBB at $20.20; JJC at $43.57; MXI at $57.08. These price points fluctuate on a daily basis and updated data can be found at www.SmartStops.net.
-- Written by Kevin Grewal in Laguna Niguel, Calif.
Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.