BHP Billiton Limited

On September 28, Alcoa (AA) announced that it would split into two independent companies. The transaction is expected to be completed in the second half of 2016.

Iron ore volumes are key to Rio Tinto’s (RIO) iron ore segment’s revenue. The other factor, seaborne iron ore prices, is determined by demand and supply dynamics.

Rio Tinto’s (RIO) underlying EBITDA (earnings before interest, taxes, depreciation, and amortization) was $7.3 billion for 1H15.

Within four trading days of its 1H15 results, Rio Tinto’s stock price rose 3%. This is despite a 1.7% fall in benchmark seaborne iron ore prices.

Chinese credit easing measures should positively impact the steel industry. This will help iron ore companies like Rio Tinto and BHP Billiton.

Since the end of July, benchmark iron ore prices have been holding steady near $55–$57 per ton. This is despite the continuing slide in other commodities amid China slowdown worries.

With the recent news of activist investor Carl Icahn taking an 8.5% stake in the company coupled with Freeport’s lower capital expenditure guidance, the stock has seen a smart up move.

Iron ore costs are key to determining BHP’s iron ore segment’s profitability, which ultimately impacts its stock price and relative performance.

BHP Billiton’s iron ore production for fiscal 2015 was a record 233 million tons, a growth of 14% year-over-year.

BHP Billiton’s (BHP) (BBL) underlying EBITDA was $21.9 billion for fiscal 2015. This is a fall of 28% year-over-year (or YOY). Operating income also fell 46% YoY in fiscal 2015.

BHP Billiton (BHP) (BBL), the world’s largest miner by market capitalization, reported its fiscal 2015 results on August 25. The results were mostly in line with market expectations.

Vale’s (VALE) average CFR (cost and freight) realized price for iron ore fines increased by $3.30 per ton, from $58.20 per metric ton in 1Q15 to $61.50 in 2Q15.

Vale’s (VALE) iron ore production for 1H15 was a record 159.8 million tons, 9.3 million tons higher than 1H14. For 2Q15, production was the second highest on record at 85.3 million tons.

In this article, we’ll look at Vale’s (VALE) 2Q15 results and why they’re a beat on market expectations. Vale reported adjusted EPS of $0.19, which was 55% above consensus.

Vale S.A. (VALE) reported its 2Q15 results on July 30, 2015. Overall results were a beat on market expectations. However, Vale’s stock price fell 6.5% after Vale announced its results.

Cliffs Natural Resources reported revenues of $498 million for 2Q15, a decline of 33% year-over-year.

Alcoa was trading at its 52-week low on July 23 and closed at $9.96—breaching the psychologically crucial level of $10 per share for two consecutive days.

Freeport-McMoRan (FCX) released its 2Q15 earnings on July 23. It reported a net loss of $1.85 billion, which was largely attributable to the $2 billion write-down of its oil and gas assets.

Aluminum prices have been in a downtrend for more than a month.

According to data released on June 22 by the WSA, world crude steel production totaled 139 million tons in May. This is a 2.1% decline year-over-year.

China’s industrial production grew by 6.1% year-over-year in May. Economists were expecting an increase of 6.0%. May’s growth is higher than the 5.9% year-over-year growth in April.

According to the World Bureau of Metal Statistics, Peru’s refined copper production declined in the first three months of the current year.

Vale S.A. (VALE) reported revenues of $6.4 billion in 1Q15, a decline of $2.9 billion compared to 4Q14. Most of the decline is due to seasonally lower sales volumes and lower commodity prices.

On April 23, Freeport said it might look at selling a minority stake in its energy business and come out with an IPO of its oil and gas subsidiary later in the year.

As for market sentiment, Cliffs (CLF) seems to be on the receiving end. Most of it is due to the worsening current and future outlook for iron ore prices.

Cliffs Natural Resources’ (CLF) key driver is global demand for the raw materials used to make steel.

Cliffs’ (CLF) stock prices fell to a fresh 52-week low of $4.24 on March 19, mostly due to an iron ore supply glut coupled with slowing Chinese demand.

BHP Billiton (BHP) is a leading global diversified resources company and is one of the world’s largest major commodity producers.

Vale’s results were a miss on expectations with a reported adjusted EPS loss of $0.05 per share. This is below the consensus of $0.19 per share.

Vale is the world’s largest producer of iron ore and iron ore pellets. It’s the second largest nickel producer.

Key earnings takeaways from Vale’s results show cost of goods sold amounted to $25.1 billion in 2014, an increase of $819 million from 2013.

It’s important to look at iron ore indicators collectively because they give clues about the direction of iron ore prices.

Copper mining is concentrated in Latin America, while the major copper consumers are in Asia. More than 60% of global copper consumption comes from Asia.

Because of its excellent heat transfer capabilities, copper is also widely used in producing heat exchange equipment and other uses in extreme environments.

Headquartered in Melbourne, Australia, BHP Billiton operates 100 locations in 25 countries. A merger between BHP and Billiton created the company in June 2001.

With over 65% exports going to China, China is the real swinger in global iron ore prices. A slowdown in China caused panic among all major commodity exporters.

In the seaborne met coal market, the swing producers are clearly the Australian producers. Australia is the second largest of the met coal producers. It’s the largest met coal exporter.

With the emergence of China’s demand, prices moved to quarterly contracts from annual private negotiations in 2010.

The cost curve also sets the floor for the price because if price falls below the cost of production of some players, those players will be out of the market.

Capital intensity is a measure used to determine the efficiency of production.

Chinese environmental protection and pollution control measures will necessitate the use of higher content.

Surface mining is done when the deposits of commercially useful minerals are found near the surface.

Prior to the industrial revolution, most of the iron ore was mined directly from hematite deposits.