WSJ : BHP, Rio Tinto Say Chinese Demand for Iron Ore Not Fading

BHP, Rio Tinto Say Chinese Demand for Iron Ore Not Fading

BHP executive says outlook for China’s resource demand remains compelling

SYDNEY—The world’s two largest mining companies say they are convinced China’s hunger for iron ore isn’t about to fade, even as the price plumbed new lows after Beijing’s official acceptance it is set for slower economic growth.

In an interview with The Wall Street Journal, BHP Billiton Ltd. ’s iron-ore president Jimmy Wilson said the outlook for China’s resource demand remained compelling, as the world’s second-largest economy expands from a larger base level.

He said demand for steelmaking ingredient iron ore from the country’s manufacturing sector had been running above BHP’s expectations in recent months and the country’s cooling property market could also be set for an uptick.

“I think we have to appreciate that China is getting bigger—they are targeting 7% [growth] and they are actually uncannily capable of delivering against those targets,” Mr. Wilson said. “We should never underestimate what is happening in China, and what continues to happen in China.”

His remarks echoed earlier comments from Rio Tinto PLC’s iron-ore chief executive Andrew Harding, who expressed optimism Beijing can maneuver the Chinese economy into a new stage of growth during a speech in Perth on Tuesday.

China last week lowered its economic growth forecast to about 7% for 2015. That compared with 7.4% growth last year, its lowest level in nearly a quarter-century.

Leaders have dubbed it a “new normal” during the annual National People’s Congress in Beijing.

China’s more sober tone has rattled the global iron-ore market. Around $58 a ton, the spot iron-ore price is at its lowest since The Steel Index began publishing prices in 2008. China’s iron-ore imports are already down 0.9% year-to-date, according to the latest customs data.

Mr. Wilson said the sharp downturn in prices—which have halved in the past year—isn’t drastically different from BHP’s internal expectations.

Both BHP and Rio have been aggressively expanding their operations in the Pilbara iron-ore mining hub of northwest Australia.

Rio, the world’s No. 2 iron-ore exporter, after Brazil’s Vale SA, is aiming to increase its ore shipments from the Pilbara by nearly 30% within a few years. While BHP isn’t investing so much in expansion, it expects to grow production from existing mines in the near-term thanks to higher productivity.

The two companies have been heavily criticized by competitors and some investors for maintaining their rapid output growth despite iron ore’s slide.

Rio’s Mr. Harding said China’s steel production only needs to rise 1% a year-in line with its estimated growth last year-for the country to reach 1 billion tons of crude steel output around 2030.

“China is currently the country demonstrating the most exciting growth in the developing world,” Mr. Harding said.

Neither of the Australian giants seems prepared to cut output to help boost iron-ore prices. Instead, they argue producers with higher costs will have to cut supply first, a trend that should eventually put a floor under ore prices, they say.

Rio Tinto has estimated 125 million tons of costly output—about 85 million from China—was shuttered last year. It estimated another 85 million tons could be cut in 2015; helping cushion the blow of another 100 million tons of higher supply from places such as Australia.

BHP’s Mr. Wilson—who visits China at least once a year—meanwhile said China’s recent surprise interest rate cut could aid iron-ore demand.

“That would certainly put a bit more impetus into the housing market,” he said, although he said it was still too early to assess the rate cut’s impact.

Chinese Premier Li Keqiang has meanwhile vowed to cut overcapacity in the steel industry, and tackle pollution; yet more measures traders worry will damp demand for iron ore.

But Mr. Wilson said such efforts weren’t affecting overall iron-ore demand, though they were making steel mills more eager for higher-quality ore.

Both BHP and Rio are cutting their own costs aggressively, though, to cushion the pullback in prices.

While BHP says the “lion’s share” of its job cuts have already been handled, rival Rio Tinto Tuesday confirmed it likely has hundreds of layoffs ahead in its iron-ore division.

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: WATT +19.1%, MM +6.9%, URBN +6.8%, XOXO +5.1%, QIHU +4.1%, VSTM +0.9%, RDUS +0.6%

M&A news: BBNK +14.2% (to be acquired by Western Alliance Bancorporation (WAL))

Other news: BONE +11.6% (signed a national distribution agreement with Spartan Medical), DARA +10.5% (announces the acquisition of exclusive North American rights to Oravig from Onxeo S.A.), RESN +9.3% (engaged with a second customer for the design of an RF filter utilizing its Infinite Synthesized Networks, or ISN technology), CS +6.3% (Brady Dougan to leave Credit Suisse as CEO; current Prudential (PUK) CEO Tidjane Thiam to become Chief Executive Officer of CS), MPO +5.2% (executed a Purchase and Sale Agreement with Pintail Oil and Gas for the sale of its Dequincy assets located in Beauregard and Calcasieu Parishes, Louisiana for total consideration of $44 mln), LL +4.2% (announced agenda for its business update conference call to be held on March 12, 2015 at 10am ET), RJET +4.1% (to replace MMS in the S&P SmallCap 600), RMGN +3.4% (cont strength), ORAN +3.1% (still checking), QCOM +2.3% ( announced increases in its capital return program), SWKS +1.9% (to replace PETM in the S&P 500), MRGE +1.7% (Guggenheim Capital disclosed a 10.9% active stake in 13D filing), MMS +1.5% (to replace SWKS in the S&P MidCap 400), NBG +1.5% (still checking), SGYP +1.3% (OrbiMedCapital discloses 13.57% passive stake in 13G filing)

Analyst comments:SVU +2.1% (upgraded to Buy from Hold at Deutsche Bank), RDN +2% (initiated with a Buy at BTIG Research), ARRS +1% (upgraded to Overweight from Equal Weight at Barclays ), GG +0.8% (upgraded to Hold from Underperform at Jefferies), NVDA +0.6% (upgraded to Buy at BofA/Merrill)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: TITN -14.2%, WPRT -13.6%, BIOC -10.1%, KFY -8.8%, UNFI -8%, EGT -7.6%, RM -7.2%, VNET -5.8%, MR -4.8%, FENG -3.7%, LMNR -3.3%, ACRX -2.9%, PUK -2.3%, MUX -2%, AMCN -0.9%, PEB -0.9%, MVIS -0.8%

Select metals/mining stocks trading lower: BHP -3.1%, FCX -2.1%, VALE -2.1%, MT -1.8%

Select oil/gas related names showing early weakness: STO -4.1%, SDRL -3.1%, TOT -2.9%, RDS.A -2.2%, HAL -2%, BP -1.9%, RIG -1.6%

Other news: ANV -41.5% (files voluntary, 'pre-arranged' chapter 11 cases; restructuring supported by majority of creditors and includes a cash injection of $78 million), CLMT -6.6% ( announces public offering of 6 mln common units), CPE -5.5% (prices 9,000,000 shares of its common stock for total estimated gross proceeds of ~$59 mln), CTIC -5% (pulling back following yday's strength), NDLS -4.9% (disclosed that on March 9, 2015, Dan Fogarty announced he has resigned as Executive Vice President of Marketing for personal reasons), ROSE -4.5% ( announces public offering of 12 mln common stock shares), EEP -4.2% (commenced an underwritten public offering of 8 mln of its Class A Common Units representing limited partner interests), ADHD -4.1% (announces its Phase II safety and tolerability study of a single administration of MDX in adolescent patients with ADHD achieved its primary endpoint), CNHI -4% (following TITN's guidance; TITN is largest distributor), MAIN -3.7% (announced plans to make a public offering of shares of common stock), MERU -3.1% (disclosed that on March 4, 2015, it entered into an Annual Meeting Agreement with Vertex Special Opportunities Fund), TTPH -2.8% (announced it intends to offer and sell up to 3.5 mln shares of its common stock in an underwritten public offering), CSIQ -2.8% (releases comments on European Commission Letter which raised potential issues concerning compliance with its undertaking agreement; co says any decision would not significantly impact FY15 guidance), BUD -2.4% (still checking), KYTH -2% (commenced an underwritten public offering of $125 million of shares of its common stock), MGM -2% (in sympathy with MPEL), TSEM -1.8% (will offer an acceleration mechanism to its existing Series F convertible bonds, available to all such holders, targeting a conversion of ~33% of its outstanding bonds), GAIN -1.7% (announces common stock offering of 3 mln shares of common stock), IMPV -1.3% (announces a proposed follow-on offering of 3 mln shares of its common stock)

Analyst comments: ZIOP -6% (downgraded to Neutral from Buy at Mizuho), XON -4.6% (downgraded to Neutral from Buy at Mizuho), MPEL -3.2% (downgraded to Sell from Buy at Deutsche Bank), EA -2.9% (downgraded to Hold from Buy at Needham), LECO -2.4% (downgraded to Hold from Buy at BB&T Capital Mkts).

>>> US Early premarket gappers

Early premarket gappers

Gapping up: WATT +19.1%, BBNK +14.2%, DARA +10.5%, RESN +9.3%, MM +6.9%, URBN +5.9%, XOXO +5.1%, QIHU +5%, RJET +4.1%, RMGN +3.4%, ORAN +3.1%, QCOM +2.3%, SWKS +1.9%, MRGE +1.7%, MMS +1.5%, NBG +1.5%, SGYP +1.3%, NVDA +1%, CHK +1%, VSTM +0.9%

Gapping down: ANV -41.5%, WPRT -13.6%, TITN -12.1%, UNFI -10.4%, KFY -8.8%, RM -7.2%, CLMT -6.6%, VNET -5.8%, CPE -5.5%, CTIC -5%, NDLS -4.9%, MR -4.8%, ZIOP -4.6%, ROSE -4.5%, EEP -4.2%, BIOC -4.2%, STO -4.1%, CNHI -4%, MAIN -3.7%, FENG -3.7%, SAN -3.4%, LMNR -3.3%, MERU -3.1%, BHP -3.1%, SDRL -3.1%, XON -3%, TOT -2.9%, TTPH -2.8%, MPEL -2.8%, BUD -2.4%, RDS.A -2.2%, DB -2.2%, FCX -2.1%, VALE -2.1%, KYTH -2%, HAL -2%, RCL -2%, MGM -2%, MUX -2%, BP -1.9%, MT -1.8%, SAP -1.8%, GAIN -1.7%, NOK -1.6%, RIG -1.6%, IMPV -1.3%, CASY -1%, FWM -0.9%, ACRX -0.9%, AMCN -0.9%

WSJ : Signals From U.S., China Show How Much Global Economy Has Shifted Since Cr

Signals From U.S., China Show How Much Global Economy Has Shifted Since Crisis
Mismatch between world’s No. 1 and No. 2 economies in growth forecasts and policy responses portends market aftershocks

Developments in just the past week underscored a remarkable turnabout in the global economy since the financial crisis.

Six years ago, the U.S. was in financial panic, Europe was seen largely as an innocent bystander and China as an engine for a return to global growth.

Now the U.S. economy is charging ahead—producing jobs at the fastest pace since the late 1990s—while Chinese authorities are struggling to manage a gathering slowdown and Europe is still getting back on its feet.

Emblematic of the shifts are differing monetary signals: Strong U.S. jobs data on Friday increased the likelihood the Federal Reserve will raise short-term interest rates this year, while the People’s Bank of China added to a rate-cutting campaign early this month.

The mismatch in growth outlooks and policy responses portends financial-market aftershocks, including the potential for further gains in the U.S. dollar, which has appreciated 11% against a broad basket of other currencies in the past year and 2% against China’s yuan.

This backdrop also raises a big question: Can the U.S. economy—stronger but still weakened by crisis—power the global economy the way it did in decades past?

Because China accounts for a bigger share of global growth than it did before, its slowdown will surely have bigger global consequences than it might have in the past. But an improving U.S. and stabilizing Europe would help the rest of the world manage to weather China’s problems.

Central to the outlook: the changing patterns of financial stress across the globe.

Fed officials said Thursday that 31 large banks had passed its annual “stress tests” of their financial resilience, meaning they had capital buffers large enough to withstand a return to recession. It was the first time since the Fed launched the tests during the panic of 2009 that all banks had the capital needed to weather the Fed’s test of their financial health.

A construction worker framing a window in the upper floor of a home being built in Orlando, Fla., in February. The U.S. economy is producing jobs at the fastest rate since the late 1990s. ENLARGE
A construction worker framing a window in the upper floor of a home being built in Orlando, Fla., in February. The U.S. economy is producing jobs at the fastest rate since the late 1990s. PHOTO: ASSOCIATED PRESS
With U.S. financial institutions on surer footing, credit growth is accelerating. Commercial and industrial loan portfolios among banks in the U.S. were up 12% in mid-February from a year earlier, at the same time as real-estate and consumer loan portfolios are rising and growth of cash holdings slowing.

“It has been a painful path and somewhat disappointing, but we got to this point with a process of fairly gradual but significant adjustments in private sector [debt], a grinding healing in the financial sector and a Federal Reserve which has been consistently trying to offset [drags on growth],” said Bruce Kasman, chief economist at J.P. Morgan .

Chinese authorities, on the other hand, reduced their growth target for 2015. At 7%, the world’s second-largest economy is still expected to expand faster than almost any other in the world, but the momentum has clearly downshifted.

Growth last year was 7.4%, the slowest pace in nearly a quarter-century. The International Monetary Fund has forecast 6.8% growth for 2015.

Moreover, China’s woes are reflected in the fortunes of other emerging economies oriented toward exporting commodities—Russia and Brazil are both in or near recession.

Chinese authorities are fighting battles that threaten to work at cross-purposes—trying to boost economic output in the short run while also overhauling an economy that became heavily indebted and geared toward real estate in the aftermath of the 2008 financial crisis.

Beijing’s preference for incrementalism is leaving policy makers with fewer appealing options, slower economic growth and tighter budgets at a time when the population is aging rapidly, demanding more comprehensive social services and hungering for a better lifestyle.

While China struggles, Europe is showing some evidence of improvement, which could be an important swing factor in the global economic outlook.

The European Central Bank raised its economic forecasts Thursday for this year and next, in a sign of confidence that Europe’s economy, one of the global economy’s trouble spots for the past five years, is finding its footing even before the ECB launches a €1 trillion-plus ($1.08 trillion-plus) stimulus package on Monday. The bank sees growth above 2% in 2017.

“If Europe would really manage to move towards 2% growth it would make a big difference for the global economy and for China,” said Carsten Brzeski, an economist at ING.

After growing 20% annually from 2006 to 2008, Chinese exports to the eurozone have fallen or stagnated the past four years, he noted. And Europe, particularly Germany, depends on China, which was the top export destination for German machine tools last year.

Germany has started to rebound strongly on the back of a weakening euro, which makes German exports even more competitive in global markets amid low oil prices and rock-bottom interest rates that have fueled a construction boom.

For a global economy that has largely written off Europe for the past five years, any contribution would be welcome. “These days in the eurozone you’re grateful for any growth you can get,” said Howard Archer, an economist at consultancy IHS Global Insight.

>>> Fed Watcher Hilsenrath: It is clear by now officials intend at the March 17-

Fed Watcher Hilsenrath: It is clear by now officials intend at the March 17-18 meeting to drop the "patience" language from the statement 

The Fed has gotten two important signals in the last couple of weeks: in testimony to Congress, Fed Chair Yellen signaled an inclination to drop patience, and the market took the comments in stride, and Feb's decline in unemployment rate to 5.5% means the economy is closer to a state of full employment

(BFW) Campari 2014 Ebitda Pre One-Offs, Net Beat Ests.; Shrs Rise

Campari 2014 Ebitda Pre One-Offs, Net Beat Ests.; Shrs Rise
2015-03-10 10:30:49.956 GMT


By Heather Burke
(Bloomberg) -- Campari 2014 sales EU1.56b, est. EU1.56b.
* Ebitda pre one-offs EU337.5m, est. EU329.7m
* Ebit pre one-offs EU298.2m, est. EU288m
* Net EU128.9m, est. EU123m
* Div. EU8c, BDVD forecast EU8c
* 2014 total organic sales growth 3.4%, est. 2.8% (median of
10)
* 4Q organic sales growth 4.2%, est. 2% (median of 10)
* Outlook: Sees volatility in some emerging mkts, price
competition continuing in some core regions to continue in
2015
* Business overall, margins will benefit from the expected
return on recent route-to-market initiatives and
production investments, more favourable trends in input
costs, positive FX
* Business overall, margins will benefit from the expected
return on recent route-to-market initiatives and
production investments, more favourable trends in input
costs, positive FX</li></ul>
* Shrs up 1.5%, earlier little changed
* Call 1pm CET +44 1212 818003
*Preview


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To contact the reporter on this story:
Heather Burke in London at +44-20-3525-2044 or
hburke2@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-3525-2645 or
jludden@bloomberg.net