Australia Proposed Carbon Tax; Peabody Sends New Bid for Macarthur

Marcus Jacob
11 Jul, 2011
New York City

Stocks in Australia in a knee jerk reaction closed lower after Prime Minister Julia Gillard proposed to levy $23 a ton of carbon generated by the largest 500 Australian companies. The proposal is expected to be implemented by July 2012. Qantas quickly announced the plan to pass on the tax.

[R]5:00 Sydney – Stocks in Australia in a knee jerk reaction closed lower after Prime Minister Julia Gillard proposed to levy $23 a ton of carbon generated by the largest 500 Australian companies. The proposal is expected to be implemented by July 2012. Qantas quickly announced the plan to pass on the tax to consumers. Macarthur received joint bid from ArcelorMittal and Peabody.[/R]

Australian benchmark index declined after Prime Minister Julia Gillard proposed to levy $23 for every ton of carbon produced on 500 largest companies in Australia. The weak jobs report in the U.S. and faster than expected inflation in China also dragged market sentiment.

Airlines, steelmakers and large mining companies declined after the release of the carbon tax proposal that is expected to be in place from July 2012.

Steelmakers are expected to receive $9.2 billion in Jobs and Compensation Package and additional $300 million in “adjustment payments.”

The ASX 200 index fell 72.40 or 1.6% to 4,582 and All Ordinaries index dropped 69.20 or 1.5% to 4,647.

In trading turnover increased to 2.2 billion shares worth $4 billion changed hands and 385 stocks increased, 691 decreased and 354 were unchanged.

The Australian dollar decreased 0.6% to US$1.069 and fetched 86.39 yen. Spot gold in Sydney trading increased $15.25 to US$1,546 an ounce.

Macarthur Coal confirmed that it received a joint offer from Peabody Energy and ArcelorMittal. The latest offer values the coal miner at $4.68 billion or $15.50 a share.

The U.S. based largest coal miner Peabody has offered between $15 and $16 a share in the last two years. However, Macarthur has rejected all the offers. ArcelorMittal controls 16.07% of Macarthur.

The company said it will continue its discussion with Peabody and get a detailed understanding of the offer price and price terms and advised shareholders to take no action.

Stock Movers

Qantas declined 3.2% and Virgin fell 2.8% after the proposed carbon tax plan. Qantas is expected to pass on carbon tax charge of $115 million in the first year of implementation and will pass on the charge to customers by increasing fares by $3.50 per passenger.

News Corp plunged 5.1% to $15.92 and its non-voting stock declined 5.3% to $15.37 after the company was forced to shut down its UK tabloid on serious lapse on news gathering and journalistic practices.