Last updated on April 19, 2014 at 7:50 EDT

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

February 4, 2013

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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Source: PR Newswire