Steel

ArcelorMittal loses one battle but more lie ahead

6 Nov 2012

Moody’s was unexpectedly fast to junk the steelmaker. The financial fallout is limited. But the move underscores Arcelor’s operational and deleveraging challenge. Covenants are still tight and the time for a preventive rights issue has passed, making any future cash call harder.

ArcelorMittal buys time by melting down dividend

31 Oct 2012

A 73 pct cut will save $850 mln. This is a small but logical step for the world’s biggest steelmaker, which is trying to avoid a rights issue. The aversion is understandable given the industry is at a nadir - and given the demands a capital hike might place on the Mittal family.

ArcelorMittal uses iron ore to dodge the junkyard

19 Oct 2012

The world’s biggest steelmaker is on the edge of full relegation to “junk” credit status. A rights issue would be one - painful - solution. It’s easier to sell a minority stake in its Canadian iron ore unit for $2 bln or so, even though Arcelor likes to feed its own steel mills.

No easy fix for South Africa platinum crisis

4 Oct 2012

Striking miners want higher pay for dangerous work. But current prices are too low for the industry to pay up. Cutting production would help, but platinum mines are deep and expensive to shut. Firing workers is political dynamite. So the crisis drags on.

Iron ore crash reveals flawed boom-time economics

4 Sep 2012

The steel ingredient’s sharp fall from $150 to $90 a tonne defies cold economic logic. But then again, a market that had been preternaturally hot wasn’t likely to behave rationally. For Australia’s Fortescue and other highly leveraged miners, the lesson is painful.

Anglo finds satisfactory end to Chilean quarrel

23 Aug 2012

The London-listed miner has buried the hatchet with Codelco, selling Chile’s copper producer 25 pct of a disputed mine for $1.9 bln. Anglo American’s other problems will be harder to solve, but here CEO Cynthia Carroll can reasonably claim she’s protected shareholder value.

Spending still needed despite mine capex cull

22 Aug 2012

BHP Billiton’s decision to shelve a $20 bln Australian copper and uranium dig shows reassuring discipline. As lower returns challenge more marginal projects, investors may ask miners to shovel even more cash in their direction. The biggest miners can afford to think longer term.

Could be worse is no rallying cry for Arcelor

25 Jul 2012

The Q2 results weren’t a disaster, but the steel giant sees little respite from weak demand. A 2 pct jump in ArcelorMittal’s shares suggests investors are taking comfort in a thwacked valuation, and progress reducing debt. But it would take nerves of steel to bet on a rally.

Copper whale fears miss the point

20 Jul 2012

A prominent U.S. politician has slammed plans for exchange traded funds backed by physical copper, arguing they could pinch industrial buyers. Financial hoarding of base metals is a problem, but it’s more to do with cheap money and warehousing rules than speculation with ETFs.

HKEx’s offer for the LME stretches the numbers

20 Jun 2012

The Hong Kong bourse may pay 1.4 bln pounds for the London metals trader. HKEx hopes its investment will yield 10 pct-plus by 2017. A Breakingviews calculator shows Chinese LME trading volume would have to grow over 40 pct a year and become half the business. That’s a tall order.

China’s steel sector needs more than a stimulus

25 May 2012

Its mills made a loss in the first quarter, and falling iron prices won’t get them out of their predicament. The problem is rampant overcapacity. While China’s steel needs are growing, producers are now years ahead of themselves. Politics, not profits, are driving the cycle.

Miners can live with a not-so-super cycle

22 May 2012

Cooling demand in China, the world’s most important swing customer for metals like copper and iron ore, suggests the decade-long materials boom may be fading into a more humdrum cycle. That’s a challenge for the top miners. But it doesn’t necessarily herald value destruction.

Jewellers needed to ease gold bugs’ pain

11 May 2012

The price of the yellow metal has hit a four-month low despite the recent flare-up in the euro zone. Physical buyers may eventually stop the slide, but without a clear signal from the Fed that it is prepared to open the money spigot again, the lacklustre performance could continue.

Hong Kong’s LME bid is big bet on China flows

10 May 2012

Hong Kong’s bourse has joined the bidding for the London Metal Exchange. If it can attract more volume from China, that would make up for the lack of obvious cost savings. But Beijing may open up anyway. HK’s lack of metals expertise makes the move look ambitious.

China’s grip on rare earths market looks fragile

12 Apr 2012

High rare earth prices won’t last forever. Beijing’s drive to shut dirty smelters may support prices near term. But miners elsewhere will be better placed as Chinese producers are held to higher standards. As new mines come online, greater competition should bring prices down.

Diamonds are simply too small for Rio and BHP

27 Mar 2012

While Anglo America has just dropped $5.1 bln bulking up in diamonds, Rio Tinto and BHP Billiton are running for the exits. The industry is just too small for the biggest miners, despite solid fundamentals. That clears the way for niche players or even private-equity firms.

Asset grab a new twist in platinum’s tale of woe

15 Mar 2012

Impala Platinum’s cave-in over control of a Zimbabwe mine is bad news for an already-struggling industry. Labour strife, deadly mines and spiralling costs make it hard for producers to earn reasonable returns on the white metal, despite high prices and an effective oligopoly.

China has much to gain from rare earths fight

13 Mar 2012

A new WTO case against China may put Beijing on the defensive. But China’s global dominance puts it in a strong position to resist pressure. Besides, the backdoor trade protectionism plays well at home, as does the effort to make rare earth mining less environmentally damaging.

RUSAL oligarch row isn’t about governance

13 Mar 2012

Viktor Vekselberg, the chairman of RUSAL, is quitting and the aluminium giant’s controlling shareholder Oleg Deripaska says he would have been fired anyway. The row is the result of an industrial and financial dispute long in the making, with political undertones.

Vedanta restructuring may need a rejig

28 Feb 2012

The India-focused FTSE 100 mining group is simplifying itself. There are sound commercial gains to be made in the process, but doubts linger about whether the assets are being transferred at equitable values. To get the deal done, Indian investors may need a bit more of the pie.