After just a middling performance last year, the materials sector has been a serious laggard in 2013, with a return of only about 15 percent, outperforming only utilities and telecom.

Macroeconomic worries such as anemic growth in the developed world and concerns about an emerging market slowdown have weighed heavily on commodity prices throughout the year, denting the performance of even the strongest commodity producers. And with a Federal Reserve taper likely sometime in 2014, odds are the sector will remain quite volatile.

But materials companies shouldn’t be abandoned altogether, since they do form the backbone of the global economy. And given their weak performance this year, the strongest of the bunch might even surprise to the upside in 2014.

Thanks to slow but steady growth around the world, analysts at Citigroup (NYSE: C) forecast that global iron ore demand will grow an average 3.6 percent annually through the end of the decade. Global coal consumption is also expected to continue leapfrogging, outpacing oil demand by the end of this decade largely because of demand from India and China.

So the name of the materials game in 2014 will be focusing on high quality, low-cost producers with close proximity to Asia, though even they will likely have ups-and-downs next year.

Diversified miner Rio Tinto (NYSE: RIO), a major producer of iron ore, copper and aluminum meets those criteria and finally seems to be mounting a turnaround.

The company’s shares have been incredibly volatile over the past few years, with a beta running at 1.6. But shares have rallied by more than 31 percent off their recent July low, as recently appointed CEO Sam Walsh has made credible progress in streamlining the business.

Tom Albanese, Walsh’s predecessor as CEO, was known for his acquisitive nature, which was what ultimately lead to his ouster. His ill-timed, top-of-the-market acquisitions of Alcan in 2007 for $38 billion and the $4.2 billion acquisition of Mozambique coal miner Riversdale in 2011 triggered a $14 billion write-off earlier this year and billions more in impairments.

But since taking over in January, Walsh has cut about $1.8 billion in operating costs, completed five major projects and sold more than $3 billion in noncore assets, with plans to reach a total savings of $3 billion by next year.

Rio is also in the process of growing its iron ore production in Australia from about 290 million tons this year to 350 million by 2017. While a number of new production projects were slated to come online this year in China, relatively few have actually materialized, so domestic production has failed to keep up with demand.

Walsh has said that he expects iron ore prices to decline in 2014, but thanks to his focus on low-cost production, he believes Rio can take up the slack on higher volumes, primarily thanks to sales to China.

Additionally, Rio believes that strong steel demand and the rapid pace of urbanization in both India and China will provide a boost to its coal business, forecasting that demand for thermal coal will grow at a compound annual rate of 2.9 percent over the next five years, while metallurgical coal demand will grow at a 4.6 percent rate. At the same time, Rio has brought its Australian coal unit cash costs down to 14 percent below its 2010 level, improving both its competitive position and margins.

Thanks to Rio’s renewed focus on low-cost supply in all of its business lines, Walsh’s asset disposals and his focus on reducing operating costs, I see little reason to doubt that the company will complete its turnaround plan and rise back to the top of the materials sector.

That said, next year will likely be a volatile one for materials stocks, as central banks begin backing off their stimulus efforts. But organic economic growth should help propel demand growth for materials.

Showing improved cash flows thanks to its streamlining efforts, Rio Tinto continues to rate a buy up to 60.

As the world’s largest publicly traded materials conglomerate, BHP Billiton (NYSE: BHP) will benefit from the same factors as Rio Tinto.

In the first quarter of its fiscal 2014, the company reported better-than-expected production numbers, as it boosted its output of iron ore to a quarterly record 46 million tons and now forecasts production of 212 million tons for the full year. Petroleum production also hit a new record at 62.7 million barrels of oil equivalent, with much of the gain thanks to production growth in the US.

Like Rio, BHP is also working to cut costs, cutting 25 percent of its capital expenditure costs in the last fiscal year, with plans for further cuts. In its fiscal 2013, it also disposed of about $5.5 billion in noncore assets.

While Rio Tinto is as much a turnaround story at this point as anything, BHP is more about consistent delivery. BHP has been subject to the same pressures as every other mining company, but it has also done a much better job of being selective about its purchases and quickly cutting losses if projects don’t seem to be panning out.

BHP will continue reaping the advantages of its proximity to China. The company reported that its iron ore shipments jumped 43 percent year-over-year in the latest quarter, as the country continues to work on large urbanization and infrastructure projects. As a result, the company is working to expand production at its Jimblebar mine in Western Australia and upgrading its own port infrastructure to accommodate higher volumes.

The company should be able to grow earnings in the low single-digits this year, with growth accelerating into 2014, assuming the global economic recovery remains on track.

A solid performer even in difficult times, BHP Billiton is a buy up to 80.