Vale and BHP Billiton Under StockCall Microscope: Improving Chinese Economy a Good Sign

Feb 04, 2013, 08:00 ET from

LONDON, February 4, 2013 /PRNewswire/ --

Last week, two surveys showed that manufacturing activity in China, the world's fastest growing major economy and an engine of global economic growth, expanded in January. The data further confirms the Chinese economy is improving. This augurs well for industrial metals and minerals companies such as Brazil's Vale SA (ADR) (NYSE: VALE) and global mining giant BHP Billiton Limited (ADR) (NYSE: BHP). StockCall has released preliminary technical research on Vale and BHP Billiton. Sign up today for full access to those free reports at  

China Weakness Hurt Mining Companies in 2012

China's demand for raw materials has been one of the main reasons for the commodity bull-run in the past decade. As Chinese economy grew at a brisk pace, its demand for raw materials from iron ore to copper grew. This meant a period of record revenue and profits for mining companies. However, 2012 turned out to be a tough year for mining companies as the Chinese economy saw a sharp slowdown.

At the start of 2012, concerns heightened that the Chinese economy was headed for a hard landing. This had a significant impact on mining companies. A weak U.S. economy, Eurozone debt crisis and slowdown in other emerging markets also hurt mining companies.

Back in August last year, mining giant BHP Billiton announced that it will not expand its Olympic Dam project. The company cited current market conditions, including subdued commodity prices and higher capital costs, as the reason for not expanding the project. Instead, the company said that it will look at an alternative, less capital-intensive design of the Olympic Dam open-pit expansion, involving new technologies, to significantly improve the economics of the project. Download today's free technical report on BHP Billiton can be accessed by signing up at

BHP's decision was justified given the weakness in the global economy.

China's Improving Economy a Good Sign

In mid-2012, there were growing concerns that the Chinese economy will be seeing some hard times. With the U.S. economy still recovering and Eurozone in trouble, this was the last thing the global economy needed. However, concerns were eased late last year as the Chinese economy began to show signs of improvement. The trend has continued in 2013.

Last week, China Federal of Logistics and Purchasing reported that its purchasing managers' index stood at 50.4 in January. HSBC Corp., meanwhile, reported that its purchasing managers' index stood at 52.3 in January. A reading of above 50 indicates expansion. The latest data from China further confirms the fact that the world's second-largest economy is improving. The data comes shortly after a report showed that the Chinese economy expanded 7.9% in the fourth quarter.

Given the improving Chinese economy and ultra-loose monetary policy in developed world, demand for commodities could rise this year, which is a good sign for Vale and BHP.

Vale Expects Iron Ore at $110-$180/Ton

Earlier last week, Vale CFO Luciano Siani said that demand for iron ore from emerging market will keep prices between $110 and $180 per ton over the long-term. Declining iron ore prices last year had a significant impact on Vale. The comprehensive technical analysis on Vale is available upon registration at

Roberto Castella-Branco, Vale's head of investor relations, this week said that prices for iron ore would be supported by growth in markets such as China.

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