Chinese steel makers to power BHP result

CONTINUED demand for steel making commodities from China should ensure BHP Billiton reports a solid interim profit this week despite the challenges of rising labour costs and industrial unrest at some of its central Queensland coal mines, according to tipsheet Fat Prophets.
Chinese steel makers to power BHP result Chinese steel makers to power BHP result Chinese steel makers to power BHP result Chinese steel makers to power BHP result Chinese steel makers to power BHP result

Courtesy BHP Billiton.

Lou Caruana

“China will still be pushing mining companies such as BHP to deliver enormous quantities of raw materials and at a solid rate of increase into 2012,” it said.

“All the steelmaking raw materials within BHP – iron ore, metallurgical coal and manganese – performed nicely. Iron ore production for the second quarter was up 22% on the prior comparable quarter last year, with metallurgical coal up 9.1% and manganese roughly stable.”

These three commodities equated to approximately 45% of BHP’s total group valuation, meaning demand from steelmaking nations was very important, Fat Prophets said.

With BHP’s full-year production data now revealed, investors would move towards two key issues – realised commodity prices and rising input costs.

“All mining companies are facing similar issues so it will come down to how each company is managing its way through them,” Fat Prophets said.

“Labour stoppages [affected] the Queensland metallurgical coal mines.

“The mines are still ‘drying out’ from last year’s floods, but are quickly recovering.

“Commodity prices have driven the very large increases in underlying earnings over several interim periods now, leaving open the possibility of disappointment as prices have eased from elevated levels over the latter part of 2011.”

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