The fortunes of iron ore and its many good bedmates

The broad, heavy, heave continues towards integrated steelmakers, and upstream to iron ore, coking coal, manganese, nickel, and even molybdenum and cobalt.

JOHANNESBURG  - 

The London pricing for BHP Billiton, the world's biggest diversified resources stock, is flirting with all time record levels around GBP 22.00 a share, seen in May 2008. On the NYSE, the stock price is around USD 76.00 a share, a good clip off the USD 95.00 record seen in May 2009.

While this may say a good deal about the relative movements of currencies, the broader fundamental sweep in global portfolio flows among resource stocks continues to witness a heavy heave towards integrated steelmakers, and upstream into miners of iron ore, and its downstream bedfellows, such as coking coal, nickel, and even molybdenum.

The annual theatrical rounds of iron ore contract pricing negotiations are pushing increasingly into headlines, under spot prices in Chinese waters around the USD 140.00/tonne mark, about double prevailing contract prices, which are anticipated to increase by 50%.

As the No 3 in seaborne iron ore, stock pricing for BHP Billiton is benefiting heavily, as are No 1 and 2 in the business, Vale, and Rio Tinto. BHP Billiton shareholders are also smiling on rising coking (metallurgical) coal prices, where the BHP Billiton-Mitsubishi alliance ranks as the biggest player in the seaborne business. China turned net importer of coal during 2009.

For now, seaborne iron ore is leading global resources. According to Vale, Chinese iron ore imports in 2009 reached an all-time high of 628m tonnes, up 41.6% on a year-on-year basis, driven by steel production growth, and the increasing reliance on imported iron ore. China has long been the biggest iron ore miner, but it's just not enough.

The total volume of iron ore and pellets sold by Vale in 2009 reached 247mt, against 296mt in 2008, "a decrease explained by the significant fall in iron ore demand during the first half of last year". Even so, Vale attained an all-time high sales volume to China, at 140mt, expanding its shipments by 49mt, or 53.6%.

Prevailing spot prices indicate that Chinese demand for iron ore continues to return to best levels. In the stockmarkets, steelmakers well integrated upstream into raw materials such as iron ore are in stiff demand by investors, and include Russia's Severstal, Mechel, and Magnitogorsk, and Brazil's CSN and Usiminas.

Demand for manganese, and other ferrous materials, is doing wonders for the likes of South Africa's Assore and ARM, and interest is also returning to molybdenum stocks, as led by Chile's Molymet. Kazakhstan's ENRC benefits from its exposure to ferrochrome, along with other specialists in the area such as Ferbasa.

There is also focused demand for selected stocks in nickel, another iron ore bedfellow, as seen in pricing for the likes of Sherritt, and the world's biggest nickel miner, Norilsk. Cobalt, yet another sometime steel friend is on the rise, as seen in the pricing for OM Group.

In the red hot iron ore area, most demanded Tier II and developers include Australia's Fortescue, Giralia, and Ferraus; India's Sesa Goa; Canada's Northland Resources, Labrador Iron, and Cons.Thompson; London's Ferrexpo, and Anglesey Mining, South Africa's Kumba Iron Ore, and the US's Great Northern.

Outside China, listed coal stocks are increasingly in demand, as seen for Alliance Holding, Walter Industries, Natural Resource Partners, Peabody Energy, and Consol Energy; for Indonesia's Indo Tambangraya, Russia's  Raspadskaya, Australia's Riversdale Mining, and, as always, Canada's specialised smaller coking coal star, Grande Cache.

In base metals, price leaders include copper names Discovery Metals, Northern Dynasty, Nevada Copper, Hana Mining, Corriente, and Palamin.

Stocks with irresistible confluences include Teck (coking coal, copper and zinc), Cliffs Natural (iron ore and coking coal), Australia's Aquila (iron ore, coal, and manganese), and Exxaro (coal and iron ore).  

There are, as always, the usual crowd of gold developers among most-demanded resources stocks; developers that diehards have used super glue to slap on the label "WILL BE SOLD FOR HARD CASH FOR MORE THAN IT'S WORTH TO A MAJOR, COME HELL OR HIGH WATER": Clifton Star Resources, Andean, Highland, Red Back, Oceanagold, Patagonia Gold, Semafo, Osisko, Cluff Gold, Alamos, Anatolia, Chesapeake Gold, Exeter Resources, and, of course, many others.

There is also some highly focused demand for selected uranium stocks, including Mantra Resources  and Berkeley Resources.  The recent heavy duty interest in the mining of fertiliser materials, as evidenced by the activities of BHP Billiton and Vale, has stimulated demand for the likes of Agrium, Athabasca Potash, and Compass Minerals.

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