China Demand Drives Raw Materials Higher

Imagine a vast country that, after being held back for decades by Maoism, must build almost everything from scratch.

By now you know the story: Pro-business policies and cheap labor helped China become the factory to the world. New wealth means new investment in public- and private-sector infrastructure. A new consumer class means new demand for goods, everything from toy cars to real cars.

What does China need to meet its industrialization, modernization and consumer needs? Raw materials, such as copper, coal, iron ore, zinc, lead, aluminum, oil and gas.

London-based metal ores producer Rio Tinto （RIO）, featured in this column on Thursday, announced on Wednesday its $3.9 billion acquisition of Australian miner Riversdale Mining, which owns huge coal properties in Mozambique.

China's relentless demand has lifted prices for steel and steel's ingredients: iron ore and coke. That's been a major factor in the success of mining stocks. Many of the leaders in that industry are foreign companies.

Here are some other highly rated names from IBD's Mining-Metal Ores group :

Australia's BHP Billiton （BHP）, a producer of metal ores, coal, oil and gas, is trying to bust out from a slightly short cup-with-handle. But volume is dry. The company is expected to report a 38% earnings hike in fiscal 2011, which ends in June, and 59% for fiscal 2012.

Brazil's Vale （VALE）, a big-cap stock, has been trading tightly for the past three weeks with support at its 10-week moving average. That action may be seen as a high handle to a cup that started in November.

Iron ore makes up 59% of Vale's output, nickel accounts for 13%. Aluminum, copper, manganese and coal make up the rest. Vale logged triple-digit EPS gains for two straight quarters, and is expected to make it a three-peat in Q4.

Canada's Thomson Creek Metals （TC） is a producer of molybdenum, a precious metal that can be used to make high-strength steel alloys.

The company saw profit surge 227% in Q3, with a consensus estimate of a 50% gain for Q4. After-tax margin in Q3 leapt to 32%, its highest in years.

South Africa's Impala Platinum Holdings （IMPUY） produces platinum-group metals. Platinum, palladium and rhodium are key ingredients to the catalytic converter. China's booming auto sector is a source of hot demand for the PGMs .

Impala suffers from negative three- and five-year EPS growth rates. Total fund ownership is falling.

The stock trades just 3,000 shares per day in the U.S. But on its primary listing in Johannesburg, Impala trades 1.9 million shares.