BHP: China's Growth Will Remain Strong. But...
BHP, the world's biggest mining company, reported a 77% increase in profits. More importantly, it offered the opinion that China's economic boom -- and its demand for commodities should continue.
On the plus side, in the latest weekly report, Copper inventory tracked by the LME fell 125 tons to 122,650 tons. That's the second straight decline. BHP's "get-tough" stance with striking miners at its Escondida Copper Mine (the world's biggest copper mine) should keep the pressure on supply.
Copper mine production in 2005 was around 1 million tons lower than had been originally forecast, a big difference for an 18 million ton market. Analysts are ratcheting down their expectations for supply this year -- Macquarie just cut its forecast to 15.6 million tons from 16 million tons.
On the downside, Chinese demand for copper is down 5% in the first four months of the year compared to a year earlier, according to the International Copper Studies Group in Lisbon.
And though BHP has a bullish outlook on metals, not everyone agrees. Jim Lennon, executive director of commodities and mining research at Macquarie Bank, told Mineweb that a global increase in interest rates would inevitably result in a growth slowdown next year (after four years of global GDP growing above 4%) . That, in turn, would lead to lower prices unless supply issues got worse.
Ah, Jimmy. I believe you're living in the past. Here's my forecast for 2007. The Fed is going to cut interest rates fast and furious. We could even see a 4% Fed Funds rate next year.
Why? Because the housing bubble is imploding. July existing home sales fell 4.1%. And that's month-to-month. Year over year, July home sales were down 11.2%.
The Fed's not going to let that happen -- not with elections coming up. Does Ben Bernanke want to be known as the Fed governor who killed the economy? I should say not!
Look for lower rates going forward. That will lead to more easy money, and that should lead to higher commodity prices.
On the plus side, in the latest weekly report, Copper inventory tracked by the LME fell 125 tons to 122,650 tons. That's the second straight decline. BHP's "get-tough" stance with striking miners at its Escondida Copper Mine (the world's biggest copper mine) should keep the pressure on supply.
Copper mine production in 2005 was around 1 million tons lower than had been originally forecast, a big difference for an 18 million ton market. Analysts are ratcheting down their expectations for supply this year -- Macquarie just cut its forecast to 15.6 million tons from 16 million tons.
On the downside, Chinese demand for copper is down 5% in the first four months of the year compared to a year earlier, according to the International Copper Studies Group in Lisbon.
And though BHP has a bullish outlook on metals, not everyone agrees. Jim Lennon, executive director of commodities and mining research at Macquarie Bank, told Mineweb that a global increase in interest rates would inevitably result in a growth slowdown next year (after four years of global GDP growing above 4%) . That, in turn, would lead to lower prices unless supply issues got worse.
Ah, Jimmy. I believe you're living in the past. Here's my forecast for 2007. The Fed is going to cut interest rates fast and furious. We could even see a 4% Fed Funds rate next year.
Why? Because the housing bubble is imploding. July existing home sales fell 4.1%. And that's month-to-month. Year over year, July home sales were down 11.2%.
The Fed's not going to let that happen -- not with elections coming up. Does Ben Bernanke want to be known as the Fed governor who killed the economy? I should say not!
Look for lower rates going forward. That will lead to more easy money, and that should lead to higher commodity prices.
Check out my new gold and energy blog at MoneyAndMarkets.com
posted by Sean Brodrick @ 10:49 AM
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