Mining Week 20/’12: Commodity outlook and potential US coal takeover
May 13, 2012
Top Stories of the Week:
- Glencore and Rio Tinto fuel commodities outlook discussion
- Glencore’s Ivan Glasenberg joined his collegue at Noble group and Rio Tinto’s CEO Tom Albanese in stressing that there are no clear signs of a slowdown of Chinese commodities demand.
- Glasenberg stressed that inventory levels for many commodities are relatively low at the moment, contrary to the belief that increasing inventories should cause a drop of commodity prices somewhere in the next year.
- Sources: Financial Times; FT Video on Noble outlook; The Australian
- BHP Billiton rumoured to prepare bid for coal miner
- BHP Billiton is rumoured to prepare a bid for Walter Energy, a metallurgical coal producer with operations in the USA and Canada, and a project in Wales.
- Current market capitalization of Walter (WLT) is around $3.8bln, down roughly 50% from a year ago.
- Sources: The Telegraph; Wikipedia profile of Walter Energy; Bloomberg’s January analysis of potential takeover
- ArcelorMittal – Macarthur
Trends & Implications:
- A potential new takeover by BHP Billiton might be a good moment for BHP to announce writedowns on its acquisitions in the natural gas space. The acquisition of Petrohawk from Chesapeake last year is said to require a significant writedow as gas prices don’t seem to recover. Timing the market and combining the ‘exciting’ news of a takeover in the coal industry might partly overshadow the news of the writedown on the gas assets.
- The decrease of annual growth of the Chinese economy to single digit numbers is expected to impact construction and manufacturing activity in the short term, but the underlying outlook for the longer term continues to be a shortage of supply. Experts struggle to relate the overall economic growth numbers to short-term growth of construction sector, which drives most of the commodities demand.
©2012 | Wilfred Visser | thebusinessofmining.com