COMMODITIES – PRICES

Windfall for mining sector could hit $20b

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Original article by Jens Meyer
The Australian Financial Review – Page: 25 : 1-Dec-16

Macquarie Group estimates that financial market analysts will need to increase their 2018 earnings forecasts for resources groups by around 200 per cent if commodity prices remain at around current levels. Macquarie’s Jason Todd notes that this equates to a profit boost of about $A20bn for the sector. He argues that many analysts have factored the rise in commodity prices into their forecasts for 2016-17, but many have neglected to upgrade their earnings forecasts beyond the current financial year.

CORPORATES
MACQUARIE GROUP LIMITED – ASX MQG, STANDARD AND POOR’S ASX 200 INDEX

BHP and Rio shareholders focus on debt

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Original article by Peter Ker
The Australian Financial Review – Page: 13 & 18 : 28-Nov-16

The rally in the price of iron ore and coal during 2016 has boosted the earnings of BHP Billiton and Rio Tinto, prompting speculation of capital management initiatives. However, Jason Kururangi of Aberdeen Asset Management argues that BHP should prioritise debt reduction and investment in new projects rather than returns to shareholders. Meanwhile, Jason Beddow of Argo Investments suggests that BHP and Rio should consider increasing returns to shareholders if commodity prices remain at a similar level in 12 months’ time.

CORPORATES
BHP BILLITON LIMITED – ASX BHP, RIO TINTO LIMITED – ASX RIO, ABERDEEN ASSET MANAGEMENT LIMITED, ARGO INVESTMENTS LIMITED – ASX ARG, DEUTSCHE BANK AG, SOCIETE GENERALE AUSTRALIA LIMITED, CREDIT SUISSE (AUSTRALIA) LIMITED, MOODY’S INVESTORS SERVICE INCORPORATED

Commodities up but $A stuck at US77c

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Original article by Jens Meyer
The Australian Financial Review – Page: 27 : 1-Nov-16

The rally in the price of coking and thermal coal since early August 2016 has bolstered Australia’s terms of trade. However, the Australian dollar has been largely range-bound over this period, and it has not been able to achieve a sustained rise above the $US0.77 level. The currency has not benefited from growing expectations that the Reserve Bank will leave official interest rates on hold in the near-term. Sean Callow of Westpac expects the currency to test the $US0.70 level by the December 2017 quarter.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC, UNITED STATES. FEDERAL RESERVE BOARD, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, RESERVE BANK OF NEW ZEALAND

BHP flags end of slump

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Original article by Matt Chambers
The Australian – Page: 21 : 20-Oct-16

BHP Billiton’s production report for the September 2016 quarter shows that copper and oil output fell during the period, while there was a modest rise in metallurgical coal output and iron ore production was steady. Meanwhile, CEO Andrew Mackenzie noted that there are indications that commodity markets are starting to rebalance. Fortescue Metals Group chairman Andrew Forrest recently suggested that the market has bottomed.

CORPORATES
BHP BILLITON LIMITED – ASX BHP, FORTESCUE METALS GROUP LIMITED – ASX FMG, CITIGROUP PTY LTD, RIO TINTO LIMITED – ASX RIO

Trade surge could cut $23b from deficit

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Original article by Jacob Greber
The Australian Financial Review – Page: 4 : 14-Oct-16

Australia’s 2016-17 Budget deficit is forecast to be $A63.2bn, but analysis shows that a sustained rise in commodity prices could slash the deficit by around $A23bn. The prices of coking coal, thermal coal and iron ore have risen sharply since August 2016, and Commonwealth Bank economist Kristina Clifton says the nation’s terms of trade would improve if prices remain at around current levels for the next six months. She adds that this would also have a flow-on effect on household incomes.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, AUSTRALIA. DEPT OF THE TREASURY, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

BHP and Rio’s stellar run may be done

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Original article by Vanessa Desloires
The Australian Financial Review – Page: 19 & 25 : 14-Oct-16

Citigroup’s Clarke Wilkins forecasts that the share prices of BHP Billiton and Rio Tinto will fall in coming months. He says a reduction in China’s stimulus program will in turn reduce demand for commodities. George Boubouras of Contango Asset Management adds that there is limited scope for further gains in the price of iron ore and coking coal, which will dampen earnings growth for BHP, Rio Tinto and Fortescue Metals Group. However, Peter O’Connor of Shaw & Partners remains upbeat about the outlook for the resources sector, particularly large-cap mining stocks.

CORPORATES
CITIGROUP PTY LTD, CONTANGO ASSET MANAGEMENT LIMITED – ASX CGA, SHAW AND PARTNERS LIMITED, BHOJA AIRLINES, RIO TINTO LIMITED – ASX RIO, FORTESCUE METALS GROUP LIMITED – ASX FMG, OZ MINERALS LIMITED – ASX OZL, ALUMINA LIMITED – ASX AWC, ILUKA RESOURCES LIMITED – ASX ILU, STANDARD AND POOR’S ASX 200 INDEX, UBS HOLDINGS PTY LTD, SOUTH32 LIMITED – ASX S32, WHITEHAVEN COAL LIMITED – ASX WHC, OIL SEARCH LIMITED – ASX OSH, AWE LIMITED – ASX AWE, TRIBECA INVESTMENT PARTNERS PTY LTD, NEWCREST MINING LIMITED – ASX NCM, UNITED STATES. FEDERAL RESERVE BOARD

Worst is behind us: Forrest calls bottom of cycle

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Original article by Jacob Greber
The Australian Financial Review – Page: 6 : 13-Oct-16

Andrew Forrest has used a National Press Club speech to forecast an upturn in commodity prices, expressing his view that the sector is near the bottom of a major cycle. Forrest’s comments follow revelations that Japanese steel mills have settled coking coal price negotiations for the December 2016 quarter at $US200 per tonne. The Department of Industry, Innovation & Science recently forecast that the benchmark price for coal contracts will average $US99/tonne in 2016 and $US108 in 2017.

CORPORATES
AUSTRALIA. DEPT OF INDUSTRY, INNOVATION AND SCIENCE, NATIONAL PRESS CLUB (AUSTRALIA), PEABODY ENERGY AUSTRALIA COAL PTY LTD, NIPPON STEEL AND SUMITOMO METAL CORPORATION, MOODY’S INVESTORS SERVICE INCORPORATED

Commodities surge lifts outlook

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Original article by Barry FitzGerald, David Rogers, Sue Neales
The Australian – Page: 19 & 31 : 13-Oct-16

Copper and uranium are Australia’s only major resources commodity exports that have not posted strong gains in 2016. Coking and thermal coal in particular have rallied in the year to date, and Paul Bloxham of HSBC believes that the nation’s "income recession" is over. He estimates that nominal GDP could be boosted by around two per cent if the rise in coal prices is sustained, a view shared by the ANZ Bank. There has also been a big rise in the export price of beef, although drought caused Australian shipment to fall in 2015-16.

CORPORATES
HSBC AUSTRALIA HOLDINGS PTY LTD, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, MOODY’S INVESTORS SERVICE INCORPORATED, PEABODY ENERGY AUSTRALIA COAL PTY LTD, NIPPON STEEL AND SUMITOMO METAL CORPORATION, RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE TREASURY, RABOBANK AUSTRALIA LIMITED

Resource stocks in vogue again on back of China hopes

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Original article by Jessica Sier
The Australian Financial Review – Page: 16 : 19-Sep-16

The uncertain outlook for the Chinese economy weighed on both commodity prices and resources stocks earlier in 2016. However, Australia’s resources sector is back in favour with investors, amid growing optimism about the Chinese economy. Whitehaven Coal has gained 250 per cent in the year to date, while pure-play iron ore producer Fortescue Metals Group has risen by 164 per cent.

CORPORATES
WHITEHAVEN COAL LIMITED – ASX WHC, FORTESCUE METALS GROUP LIMITED – ASX FMG, SYRAH RESOURCES LIMITED – ASX SYR, OROCOBRE LIMITED – ASX ORE, GALAXY RESOURCES LIMITED – ASX GXY, CREDIT SUISSE (AUSTRALIA) LIMITED, HSBC AUSTRALIA HOLDINGS PTY LTD, REGAL FUNDS MANAGEMENT PTY LTD, BHP BILLITON LIMITED – ASX BHP, SOUTH32 LIMITED – ASX S32

Demand rally seen as strong enough to withstand US rate rise

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Original article by Jessica Sier
The Australian Financial Review – Page: 27 : 7-Sep-16

Cadence Capital’s Karl Siegling argues that a rise in US interest rates is likely to have only a short-term impact on the recent rebound in commodity prices. James Gerrish of Shaw & Partners notes that while the gold price is likely to be the most affected by a rate rise, the iron ore price is primarily influenced by supply and demand considerations. Siegling adds that base metal producers will be the hardest hit by a rise in US interest rates.

CORPORATES
CADENCE CAPITAL LIMITED – ASX CDT, SHAW AND PARTNERS LIMITED, UNITED STATES. FEDERAL RESERVE BOARD, MACQUARIE WEALTH MANAGEMENT, INDEPENDENCE GROUP NL – ASX IGO