Mine your own business

BHP Billiton and Rio Tinto are up over 2-1/2% today because Japan has agreed to keep the price it pays for coking coal the same as last year. That's right, the same. The big miners are up even though the revenues from coking coal will be stuck at last year's price. If the stock market truly does discount the future, you have to wonder how the future has been improved by that.

For more Guambat posts on BHP search the Technorati thingy on the right. My favourte is "Nearology".

Meanwhile, Jessica Irvine reports in the Herald:

THE Federal Government's chief commodities forecaster has warned Australia's once-in-a-generation minerals boom is nearing an end.

The prospect puts added pressure on already tense negotiations between Australian miners, Chinese steelmakers and the Chinese Government which is seeking to stop bigger contract prices for iron ore imports.

The executive director of the Australian Bureau of Agricultural and Resource Economics, Brian Fisher, yesterday flagged a dramatic slowing in price gains for mineral exports in the second half of last year.

ABARE's index of mineral export prices rose just 2.6 per cent in the December quarter, after rises of 21 and 7 per cent in the June and September quarters.

"This is further evidence that the heat is going out of the resources boom," Dr Fisher said.

The Federal Resources Minister Ian Macfarlane yesterday weighed into the stalled iron ore negotiations, issuing a terse warning to the Chinese Government not to impose price caps on iron ore from Australia.

"Our Government would be very alarmed if price caps were in place," he said. "There is no place for price caps in an open market."

The comments follow reports earlier this month that the Chinese Government is looking to set a cap of $US54 a tonne on iron ore imports and deny import licences to steelmakers accepting higher prices. The Chinese Government has since denied these reports but continues to argue that no further price rise is justified this year after last year's massive 71.5 per cent increase.

The chief equity strategist at UBS, David Cassidy, said yesterday it was now "absolutely accepted" that price negotiations would yield lower percentage price gains than last year.

"Certainly the rate of growth is going to start to slow," he said.

The ABARE report found mineral export earnings rose $1.6 billion, or 7.7 per cent, to $22 billion in the December quarter.

"These increased earnings mainly reflect significant increases in export volumes," ABARE's Dr Fisher said.

Copper, iron ore and coking coal recorded the largest rises in export earnings but earnings declines were reported for crude oil, steaming coal, LPG and nickel.

Shares in Australia's biggest miner BHP Billiton have fallen 10 per cent since the end of January.

"Low price/earnings multiples suggest the market continues to believe that commodity prices will fall over 2006 and 2007," UBS's Mr Cassidy said.

However, UBS this week increased its exposure to the resources sector, after reducing it ahead of last month's across-the-board sharemarket correction.

"We continue to see resources as an attractive sector, albeit not as compelling a proposition as in 2005," Mr Cassidy said.

Review: http://guambatstew.blogspot.com/2005/09/nearology.html