Australian PPI Falls, Rio Defends Chinalco Stake

123jump.com Staff
20 Apr, 2009
New York City

Australian producer prices unexpectedly decline 0.4% in March quarter. Rio chairman defends Chinalco $19.5 billion investment as more British investor voice their reservations but fail to provide additional capital. Asciano Group led advancers in the ASX 200 index shares with a rise of 33.2%.

[R]3:00AM New York, 7:00PM Sydney - Australian producer prices unexpectedly decline 0.4% in March quarter. Rio chairman defends Chinalco’s $19.5 billion investment as more British investor voice their reservations but fail to provide additional capital.[/R]

Australian market averages fell 0.2% despite a government report showing producer prices surprisingly fell 0.4% in the three months to March.

Commodity stocks were mixed as crude oil prices increased 0.7% to $50.30 per barrel and gold prices declined 1.4% to $867.9 per ounce.

In Sydney trading ASX 200 index declined 0.2% or 7.7 to 3,769.00.

Of the ASX 200 index stocks, 91 increased, 99 declined, and 11 were unchanged. Asciano Group led gainers in the index shares with a surge of 33.2% followed by Valad Property increasing 23.4%.

Australian Producer Prices Fall 0.4%

Australian Bureau of Statistics reported today that the country’s producer prices fell 0.4% in the three months to March from the previous quarter and increased 4% from the same period a year earlier.

Prices were weighed by fall in building construction of 1.6%, in petroleum refining of 8.9% and in dairy product manufacturing of 4.9%.

However, the decline was trimmed by industrial machinery and equipment manufacturing increasing 5.4% and tobacco product manufacturing 12.8%.

The ABS notes that producer prices of intermediate goods fell 3.2% in the March quarter from the three months to December dragged by oil and gas extraction plunging 25.0%, basic chemical manufacturing 23.5%, grain, sheep, beef and dairy cattle farming 11.4% and petroleum refining 15.5%.

The drop was pared by increases in motor vehicle and part manufacturing 7.7%, marketing and business management services 2.6% and industrial machinery and equipment manufacturing 4%.

In addition, preliminary prices fell 4.6% in the three months to March from the December quarter mainly due to price decreases in oil and gas extraction of 25.0%, in basic chemical manufacturing of 23.4% and in petroleum refining of 15.1%.

Rio Defends Chalco Investment

Rio Tinto chairman Paul Skinner said at the company’s annual general meeting last week that the proposed US$19.5 billion investment by Chinalco is the best possible offer, especially considering the current ""bottom market conditions.""

The miner is looking for alternative plans to fund the debt obligation it undertook to fund $38.1 billion purchase of Alcan in 2007. The debt of $8.9 billion is due in October this year and additional $10 billion due in October 2010.

Skinner says he expects investment in China to strengthen later this year, but caution that recovery is unlikely in the next 12 to 18 months.

The newly appointed chairman of the company in Sydney at the general meeting, Jan du Plesis said that he is ready to meet shareholders ahead of a vote on investment from Chalco.

The British insurers and Legal & General in UK who is the third largest investor in the company have voiced their dissatisfaction with the investment and are urging the company to look for alternatives to Chinese investment.

China controlled Aluminum Company of China is the largest investor in Rio Tinto and will increase its investment in the group to 18% after the proposed investment of $19.5 billion.

Gainers & Losers

Asciano Group led advancers in the ASX 200 index shares with a rise of 33.2% followed by increases in Valad Property of 23.4%, in Karoon Gas Australia of 16.9%, in Goodman Group of 15.9%, and Macquarie Media of 13.9%.

Energy stocks increased as crude oil prices advanced 0.7% or 7.7 to $50.3 per barrel. Paladin Energy soared 10.2% and Fortescue Metals soared 8.7%.

Ausenco led decliners in the ASX 200 index shares with a decline of 12.3% followed by losses in NRW Holdings of 10%, in PMP Ltd. of 10%, in Sims Metal Mining of 8.3%, and Minara Resources of 7.3%.

Resources stocks dropped as gold prices dropped 1.4% to $867.90 per ounce. Sundance Resources plummeted 5.1% and Sino Gold plunged 4.5%.