Out Fox The $treet

According to this Reuters report on CNBC, iron ore demand is set to grow at 11% through 2017. Wait, didn't stocks initially plunge today due to fears of slower demand in China for iron ore? Talk about a confusing market with conflicting currents in the news. The actual news from BHP Billiton (BHP) today was that demand from China was "flattening" or otherwise growing in the mid single digits versus the double digit growth of the past decade. Slower growth, but still growth. How this is news was beyond me. Everybody should know by now that China wants slower growth. Stocks like Alpha Natural Resources (ANR) are down some 75% since early 2011 peaks. The market has already harshly punished this met coal producer to the extreme making the initial 6% drop further signs of a bottom. Remember that met coal is used with iron ore to produce steel. So now basically within 24 hours the media is spinning out reports of massive growth in iron ore demand and the expectations f...

Always interesting to see what the major miners such as BHP Billiton (BHP) are producing and developing. Most noteworthy for BHP are the iron ore, met coal, and copper production figures from their 2nd half 2011 production report . All 3 commodities are in hot demand in China and BHP had all the incentive in the world to increase production in 2011 over 2010. Iron Ore production increased 23% for the 2nd Half (2H). Production in Western Australia delivered a quarterly record. Full year production for 2012 is expected to increase.  Met Coal production dropped 2% in the 2H over 2010. The December quarter did see a 9% increase over last year. No real prediction on 2012 production levels.  Copper production dropped 16% for the 2H and 7% for the Dec quarter. Production is forecast to drop in 2012 These results are consistent with the general opinion that iron ore is relatively easy to mine while copper and met coal are much more difficult and hence will become much more val...

Incredible news from Vale (VALE) the leading iron ore producer in the world located in Brazil. VALE plans to double capital  spending int 2011 to $24B in order to diversify away from iron ore and into pricier metals and fertilizers. This is nearly a doubling from the $12.9B planned for 2010. Who will benefit from the increased spending? Naturally companies like Joy Global (JOYG), Bucyrus (BUCY), and Caterpillar (CAT) could see improved orders. Terex (TEX) could see some orders for its new port crane business as well. What's interesting is that a large portion of the increase will go towards logistics building of expanding rail capacity and ports. Maybe that explains why CAT recently expanded its rail engine exposure. One of the major focuses of the spending will be on fertilizers. Goals include doubling phosphate rock output and quadrupling potash production by 2015. Coal production will also nearly quadruple with just about every area nearly doubling. As far as VALE, its n...

Joy Global (JOYG) is a leading builder of mining equipment especially needed for the mining of coal. Unfortunately its not owned by the Stone Fox Capital portfolios, but they do provide a great insight into the world commodity markets. JOYG reported a strong quarter and more importantly talked about 'some slowing' in global commodity demand, but reiterated that demand remains at historical highs. The key take away is that prices for met coal, iron ore, and copper remain at elevated levels and mining capacity is above 90%. Therefore, the active prospect list is growing very fast. In essence, JOYG speaks of a marker that has taken a pause before it journeys higher. Little did they know that the ISM Manufacturing report released a couple of hours later would unleash a big rally in the markets. New orders were up 51% over last year. Backlog increased to $1.8B from $1.5B on October 30, 2009. More importantly guidance was raised to between $4.1 and $4.15 up from an analyst estim...