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Re: BHP - Price weakness

The Chinese asking for a price cut in iron ore just sounds like smart bargaining tactics to me, negotiating with superpowers isn't easy.
 
Re: BHP - Price weakness

Well, the superpowers have answered!! :D West Australian today

BHP stokes ore price fight

JOHN PHACEAS

Chinese steelmakers were given a reminder yesterday not to expect iron ore prices to fall any time soon as BHP Billiton approved another $US1.5 billion ($1.95 billion) expansion of its Pilbara operations to keep pace with rampant Asian demand.

Approval of the so-called Rapid Growth Project 3 (RGP3) expansion to double production at the company's Area C mine to 42 million tonnes a year and upgrade transport infrastructure, came just 24 hours after Rio Tinto committed $1.8 billion to a rolling expansion of its own Pilbara operations.

And a further $US1.5 billion expansion of BHP Billiton's Pilbara mines was likely to get board approval "in the next 12 months", said Ian Ashby, president of BHP Billiton's WA iron ore division.

The twin expansion approvals come shortly after analysts began upgrading their iron ore price forecasts for next year, predicting prices will rise 5 to 10 per cent on the back of continued steel output growth in China, Korea and Japan.

Previously, most had predicted a small reduction or rollover of current prices given the pain inflicted on steelmakers by February's unprecedented 71.5 per cent price rise.

The first round of annual talks between Japanese buyers and the big three producers - BHP, Rio and Brazil's CVRD - began in Japan earlier this month and will continue on and off over the next five months.

The talks typically set the benchmark price for the rest of the industry, but Chinese steel companies have since flagged using their growing muscle to conduct their own negotiations.

In Perth on Tuesday, Sinosteel president Huang Tianwen also said he hoped for a return to more "balanced" prices next year, 5 to 10 per cent below prevailing levels.

Mr Ashby indicated steelmakers could not expect prices to ease significantly in the foreseeable future.

"Look, the market conditions for iron ore are still pretty strong, (and) we believe it will be stronger for longer, particularly around the China story," Mr Ashby said. "We base our investment decisions on our analysis, and that analysis says that this is a good investment."

Mr Ashby's comments were backed by fresh official data from China, which showed the Chinese economy grew strongly in the September quarter to an annual rate of 9.4 per cent, from the 9.2 per cent growth predicted by analysts, despite government efforts to slow growth to around 8.5 per cent.

Chinese steel production also continues to expand faster than expected, with output now expected to rise 26 per cent to 345 million tonnes this year, and further to 520 million tonnes by the end of the decade.

In London for the company's annual meeting last night, BHP Billiton chairman Don Argus said he expected demand growth to continue in China, Russia and India, and that commodity prices would "remain high by historical standards".

BHP Billiton's 85 per cent share of the latest expansion will cost $US1.3 billion, boosting annual output from its Pilbara mines to 129 million tonnes from 2007. Most money will be spent at Area C, where the E deposit will be developed, but $US235 million will also be spent replacing ageing port and rail infrastructure.

Mr Ashby said a decision on RGP4 to lift the company's Pilbara output to 152 million tonnes a year by 2010 was likely within 12 months and that costs would be similar to RGP3.

State Development Minister Alan Carpenter said BHP Billiton's commitment capped a "ball-bursting week" for WA.
 
Re: BHP - Price weakness

Hi Snake Pliskin

I'd have to agree with you if you can buy for $19.40 to $19.60 and derive a profit from them this month. A $2.94 range in one month is excessive for this stock. As for the rest of the quarter there is likely to be more downside imo.

Of course this is all guess work and shouldnt be taken as advice or recommendation. Do your own research and find your own truths.

Cheers
Happytrader
 
Re: BHP - Price weakness

happytrader said:
Well Snake Pliskin

I think we may have out done ourselves today!

Cheers
Happytrader
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Happytrader,

It sounds like you bagged a trophy today too.

I was happy with my little hunting trip. Found it, disposed of it and brought it home.

I have mixed opinions on BHP and foresee some more price weakness. The next month will be telling I think.(Just an opinion - not advice of any sort)

Cheers.
Snake :)
 
Re: BHP - Price weakness

Its elementary Watson I mean Snake Pliskin!

Read my post at 11.58. I with you!

Cheers
Happytrader
 
Re: BHP - Price weakness

happytrader said:
Its elementary Watson I mean Snake Pliskin!

Read my post at 11.58. I with you!

Cheers
Happytrader
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I thought you were quoting part of the bible there for a minute. :)
Yes fully agree with your post at 11.58.
 
Re: BHP - Price weakness

Interesting that BHP & BSL made Lows on 21st October Last year.
 
Re: BHP - Price weakness

Good and Bad
Saturdays West Australian

Bank points to a costly Yarrie sting in the tail

JOHN PHACEAS

BHP Billiton's $US1.5 billion expansion of its Pilbara iron ore operations was welcome but would carry a substantial sting in the tail, investment bank Credit Suisse First Boston said yesterday.

The expansion will double production at the big Area C mine to 42 million tonnes a year from late 2007 and boost BHP Billiton's total Pilbara export capacity to around 129 million tonnes.

CSFB said the expansion left the company "between a rock and a hard place" by forcing it to also shut down its Yarrie operations for up to two years while it builds a new shiploading facility on Finucane Island at Port Hedland and upgrades the Yarrie railway.

The shutdown would subsequently rob the company of about nine million tonnes of annual iron ore production at the peak of the hottest iron ore market in decades.

"While we endorse the announced iron ore expansion . . . the unit will unfortunately drop about 10 per cent of sales over the next two years," analyst Peter O'Connor said. "(That's) not great timing, given that the forgone profit will have been at peak level." Still, removing nine million tonnes of production from global supply would bolster miners' efforts to secure further price increases from buyers during talks for 2006 supplies, he said.

A spokesman for BHP Billiton said the shutdown was unavoidable, given the need to upgrade Finucane Island and the Goldsworthy railway to keep up with future shipping requirements.

BHP Billiton is also understood to be planning an intensive drilling campaign in the Nimingarra and Yarrie area during the shutdown to bolster reserves at the mature operations.
 
Re: BHP - Price weakness

This action taken by BHP gives foundation that a much longer term strong trend in commodities appears to be the case. Would be good to extract as much as poss. with current high prices, but who knows the exact increases in Iron Ore over the next few years.

I would imagine a 10-15% price increase will be obtained for 01/04/06 and who really knows after that. I have been eating away @ BHP sub $20 all this week as I think it's great buying in my humble opinion!!

Todays Age in Melbourne amongst the "Directors-BUY or SELL" in own Companys showed 2 directors of MGX buying up 1.5 million OPS. between them, which is always a good sign.
 
Re: BHP - Price weakness

johnno261 said:
This action taken by BHP gives foundation that a much longer term strong trend in commodities appears to be the case. Would be good to extract as much as poss. with current high prices, but who knows the exact increases in Iron Ore over the next few years.

I would imagine a 10-15% price increase will be obtained for 01/04/06 and who really knows after that. I have been eating away @ BHP sub $20 all this week as I think it's great buying in my humble opinion!!

Todays Age in Melbourne amongst the "Directors-BUY or SELL" in own Companys showed 2 directors of MGX buying up 1.5 million OPS. between them, which is always a good sign.
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I think the MGX oppies were directors free oppies being converted @22c each? They were due to expire on 15th.
 
Re: BHP - Price weakness

BHP is a great longterm prospect imo over other resources co's because of it's superior diversification, GoM oil problems wont really break this co.
However, I still expect further weakness, mainly for technical reasons since I'm not a 'fundamentalist'.
Also agree that they wouldnt invest like this unless they had positive longterm forecasts in place, but even big co's do get it wrong.

Heard recently that the concentration of power amongst a few large resources co's through consolidation (eg BHP/WMC (Uranium), iron ore by big three etc) will allow them greater control over the market so that high prices can be maintained for the longterm- an oligopoly? This is just the start imo but unexpected events can affect the status quo, high returns come with high risks, we just have to manage it well.
 
Re: BHP - Price weakness

At this stage BHP found support at $20.00, if that break then it will test $19.50 which should be a very strong support otherwise $18.00 should be the next target.
 

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Re: BHP - Price weakness

randomtrader said:
BHP seems weak in a strong market. Any thoughts.
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Still my view from an earlier post/s: ie support at 19.50 or thereabouts, looks like a head and shoulders or similar reversal pattern atm, a breakout that goes sideways for awhile is not the strongest, I expect a retest of that trendline way below $19. Having said that 19.50/19.40 is the crucial area, can't say anthing else for the moment, let's see how it plays out.
 
Re: BHP - Price weakness

BHP in NY and London up in the weekend, so BHP in ASX should see some blue sky tomorrow. I hope it will break $21.50 for upside opportunity. Otherwise H&S is forming.
 
Re: BHP - Price weakness

If Chip manages to earn those 600k of shares (yes, that IS big dollars by any account, enough to fund several generations of Goodyears for many, many decades!!). Wonder what the fine print of the criteria are- it should mean BHP will become one HUGE company and the ASX will be dragged up with it. I think Uranium will be the jewel in the crown.

They are talking about the freight differential and cost savings associated with the Chinese only having to pay for the cost of having the stuff shipped in from Oz as opposed to Sth America (CVRD) which is much further away so the Chinese are paying way less overall for Aussie ore- that's my understanding of the argument; so BHP is trying to get China to pay the same price overall (ie including freight costs) whether it be Sth American or Aussie ore. I don't believe that rubbish from Chip about not developing a resource if they don't get the price they want- unless they collude with RIO. They missed out on a hike for the freight differential last year let's see if they get it this year.

btw, BHP is struggling to break to new highs, these last few bars are not encouraging, especially this week. A retest of 19.40/19.50?? All depends on the general market (XJO) imo.

BHP fights for location premium
Nigel Wilson The Australian November 26, 2005

AUSTRALIA risked losing long-term iron ore investment if the market did not recognise the "location premium" of reserves, BHP Billiton chief executive Chip Goodyear said yesterday.

Speaking after the company's AGM in Perth, he indicated that the issue would be raised in the coming round of iron ore price negotiations with major buyers in China and Japan.

Last year, after iron ore prices rose 71 per cent, Chinese buyers refused to accept BHP's argument that the Pilbara price should contain a premium because of the shorter distance Australian supplies had to travel compared with those from Brazil.

"The expectation is that this will be a year of great excitement in the iron ore business - the entertainment value will be high," Mr Goodyear said, while cautioning against taking much notice of current speculation about price outcomes.

"I think you will see a reasonable outcome on both sides," he said.

"I think that (location premium) is an important thing from an Australian point of view, a strategic point of view.

"It is not going to affect our cash flow. We are the world's biggest resources company and iron ore as a percentage of our business compared with our two major competitors (Rio Tinto and CVRD) is a small part of our business.

"But what is very important is that if the location premium does not flow back to where it belongs, then you end up preferentially developing a resource other than this one (in the Pilbara).

"So five years from now, or six years from now, if you have not developed a resource and others have had a higher price than they otherwise deserve, it's tough," Mr Goodyear said.

But when questioned on the potential for new entrants to emerge in the Pilbara iron ore industry as a result of Cazaly Resources pegging a former Rio Tinto lease next to BHP Billiton orebody 18, Mr Goodyear was blunt.

"We compete extremely vigorously with Rio, CVRD and the Anglo Americans of the world for access to the resource and for access to the market.

"The key thing for us is actually the efficiency with which that product is moved ultimately to the final customer.

"It is not simply putting dirt in a railcar."

He said maintaining the technology involved in cutting rail transport costs was an integral part of the iron ore business.

"Having people in the industry is one thing. The issue is how do you ensure you are efficient and low cost so that in this case Australia can benefit from the markets that are out there.

"In the end, inefficiencies and higher costs will cost this place jobs and will cost this place business, and from BHP Billiton's point of view will cost us money," Mr Goodyear said.

West Australian State Development Minister Alan Carpenter has to decide by the end of the year whether to allow Cazaly's application for an exploration lease over the Shovelanna deposit or return it to Rio.

Shareholders overwhelmingly supported a resolution that would provide Mr Goodyear with 600,000 preferred shares in the company in five years' time.

BHP chairman Don Argus said the shares would only become available if the company's growth compared with its leading competitors was 30 per cent higher in the next five years.

The deal was linked to the returns received by shareholders and he was sure shareholders would be happy if BHP's return on shareholder funds - dividends plus capital appreciation - in five years' time was 30 per cent greater than that of its competitors.
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Re: BHP - Price weakness

Watching BHP on Friday, at 2.30 some serious buying started, went from 21.55 to close at 21.80.

Also the xjo at the same time 4559 rose to a hi of 4587 and closed 4580.

Is Santa rounding up the reindeer now for the Santa rally?
 
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