Iron Ore Prices to Rise; Australia Trade Surplus

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
03 Jun, 2010
New York City

Australia

[R]6:00 PM Sydney, Australia – Australia’s trade balance swings to surplus in April. Xstrata withdraws capital spending for copper and coal capital spending on resource tax uncertainty. Boom Logistics Ltd rises on acquisition proposal. The big three iron ore miners are planning 35% price increase in third quarter.[/R]

ASX 200 index in Australia increased or 105.00 or 2.40% to 4,486.00 and of the stocks in S&P ASX 200 index, 172 increased, 16 declined and 12 were unchanged.

Australia’s dollar gained as April trade surplus revived demand.

Australia’s trade balance swung to a surplus of A$134 million led by iron ore and coal volumes, compared with a deficit of A$2.04 billion in March, the Bureau of Statistics said in a report today in Sydney.

Iron ore volumes rose 25% while coal shipments surged 40%, even after rise in the prices of these commodities, stoked by demand from China. Exports rose 11% to A$22.7 billion while imports were unchanged at A$22.5 billion, today’s report showed.

The number of workers in the mining industry nearly doubled to 174,500 in three months till February from 94,900 in the same period in 2003, the government data showed.

In the meanwhile Australia’s services industry shrank in May again as the interest rate increase by G-20 nations crimped household demand. The services index fell to 47.5 from 52.3 in April, Commonwealth Bank of Australia and the Australian Industry Group said today in Sydney.

“The disappointing trend points to a commercial environment that is falling short of activity levels that could put the services sector on a path of solid growth,” said Australian industry Group Chief Executive Heather Ridout.

Xstrata Plc, world’s largest thermal coal exporter based in Switzerland, suspended all of it’s A$586 million project spending on coal and copper exploration in Australia on the uncertainty related to the proposed super tax on mining profits.

“The proposed tax has created a lot of uncertainty for the future of mining investments in Australia and would also impair the previously approved projects to the point where continued investment can no longer be justified,” said Mick Davis CEO of the company in an e-mailed statement.

ASX Movers

Roc Oil Company Limited led gainers in the S&P ASX 200 index with a rise of 10.4% followed by Energy World Corporation Limited 8.3%, Mount Gibson Iron Limited 7.0% and Virgin Blue Holdings Limited 7.0%.

iSOFT Group Limited led decliners in the S&P ASX 200 index with a loss of 6.4% followed by Pacific Brands Limited 2.1%, Wotif.com Holdings Limited 1.6%, Avoca Resources Limited 1.3% and The Reject Shop Limited 1.2%.

Other Movers

Arrow Energy Limited rose 1.4% to A$4.92 after the company said Thursday that an independent expert has found that Royal Dutch Shell PLC and PetroChina Corp.''s A$3.44 billion takeover offer for the company is both fair and reasonable.

BHP Billiton plc rose 2.5% to A$38.79 after the big three iron ore mining giants BHP Billiton, Rio Tinto and Vale plan to increase prices for iron ore, coking coal and other raw materials for the third quarter of 2010.

Boom Logistics Limited surged 36.6% to A$0.41 after the crane-hire company announced the substantial shareholder notice lodged by Archer Capital Pty Ltd on June 3, and press speculation that Archer and McAleese Group Pty Ltd intend to make an offer for Boom at 52 cents per share.

Commonwealth Bank of Australia added 3.0% to A$51.86.

Rio Tinto Limited advanced 3.2% to A$68.94 after the latest data from the mining company showed effective tax rate in Australia is above 35%.