Profit at Rio Tinto Group, the second-largest exporter, will rise to $10.85 billion from $10.07 billion, according to the mean of 20 analyst estimates. Shares of the London-based company jumped 12 percent to 3,509 pence this year and will reach 3,868 in 12 months, the forecasts show.
Brazil's ore exports fell 0.9 percent to 294.3 million tons in the first 11 months as rain curbed output, government data show. Vale plans to invest the least in three years in 2013 and will cut production to 306 million tons from 312 million tons this year, the company said Dec. 3.
India's shipments may slump 25 percent to 38 million tons in 2013, Australia's Bureau of Resources and Energy Economics said Dec. 12. The state of Goa, which exports more than half the country's ore, banned all mining in September after a panel said the province lost money because of illegal work.
China's miners may struggle to make up for any shortage in seaborne supply because they produce ore that contains about 20 percent iron, compared with 62 percent internationally, according to HSBC estimates and data compiled by Bloomberg Industries. Domestic ore output dropped 3.4 percent in the past two months, National Bureau of Statistics data show.
“It's not a screaming bull year, it's just a modestly bullish year,” said Tom Price, a commodities analyst at UBS in Sydney. “The next six months will be fairly active and positive for iron ore trade.”
Eoin Treacy's view Investors sentiment towards China continues
to improve and the Shanghai A-Share's surge higher on Christmas Day will further
bolster that view. It is our belief at Fullermoney that the wider Chinese stock
market has bottomed and that the potential for a resurgence in demand for commodities
is likely to accompany the new administration's commitment to further urbanisation.
The industrial metals sector has been particularly hard hit over the last few
years and should benefit from a loosening of policy. (Also see Comment of the
Day on December
This is particularly poignant for Australia where BHP Billiton (YLD 4.12%) and Rio Tinto (3.33%) are the two largest individual weightings on the S&P/ASX with approximately 13% and 7% respectively. BHP Billiton has held a progression of higher reaction lows since July and broke successfully back above A$35 three weeks ago. While somewhat overbought in the short-term, a sustained move below A$33 would be required to begin to question medium-term scope for continued upside. Rio Tinto ranged below A$60 for much of the year but broke successful above that level three weeks ago.
Elsewhere in the iron-ore sector Fortescue Metals (2.52%) shares a similar pattern with the majors. Atlas Iron-Ore found support above its September low three weeks ago and has rallied to post new three-month highs. A clear downward dynamic would be required to question potential for additional upside. In the titanium sector Iluka Resources (13.08%) posted a failed downside break in November and a sustained move below A$8 would be required to check potential for a reversionary rally back towards the 200-day MA. Independence Group NL (gold and nickel, yiled 0.9%) rallied to break the 18-month progression of lower rally highs by September and reasserted demand dominance from late November. While somewhat overbought in the short term, a sustained move below A$4.20 would be required to question medium-term scope for additional upside.
Australia's four largest banks occupy a 20% weighting in the S&P/ASX 200. It is therefore notable that Commonwealth Bank of Australia (7.68%) and WestPac (9.09%) are hitting new all-time highs. ANZ (8.32%) shares a similar pattern. All three are overbought in the short-term but sustained move below their respective 200-day MAs would be required to question medium-term upside potential. National Australia Bank (10.31%) remains rangebound.
In the retail sector, Wesfarmers (6.4%) consolidated mostly above its 18-month range from September and reasserted the medium-term uptrend from early December. A clear downward dynamic would be required to question medium-term scope for additional upside. Super Retail Group (4.66%) rallied spectacularly from October and has at least paused at the A$10 roundophobia area. A reversion towards the mean is looking increasingly likely. Myer Holdings (12.74%) broke successfully above A$2 in November and found support above that area this week. A sustained move below A$2 would be required to question medium-term scope for additional upside. David Jones (10.37%) has held a progression of incrementally higher reaction lows since June and found support this week near A$2.30. A sustained move below A$2.20 would be required to question medium-term potential for continued higher to lateral ranging. (Also see Comment of the Day on June 29th).
In the healthcare sector Ramsay Healthcare (4.86%) has exhibited one of the most consistent uptrends in the Australian market for nearly four years but is now becoming increasingly overextended relative to the 200-day MA and is susceptible to mean reversion. Cochlear (3.74%) is also becoming increasingly overextended as it approaches the upper side of its 5-year range. Sigma Pharmaceuticals (10.55%) hit a new 3-year high this week and while somewhat overbought in the very short term, a sustained move below the 200-day MA currently near 65¢ would be required to question medium-term scope for additional upside.
In the engineering sector Downer EDI is currently testing the upper side of its 18-month range and a sustained move above A$4 would suggest a return to demand dominance beyond the short term. Monadelphous Group (7.32%) has rallied impressively over the last month to post a new all-time high and while susceptible to some consolidation in the short term, a sustained move below the 200-day MA, currently near A$21, would be required to question medium-term scope for additional upside.
As a globally present diversified operation, Brambles (3.41%) is also worthy of mention. The share posted a new 3-year high this week and a clear downward dynamic would be required to check medium-term potential for additional upside.
In the telecoms sector Telstra (9.09%) continues to trend higher and while overextended relative to the 200-day MA, a break in the progression of higher reaction lows, currently near A$4.20 would be required to question medium-term demand dominance. (Also see Comment of the Day on May 12th 2011).
In conclusion, the Australian stock market with its plethora of high yielding instruments and franking system on dividends that benefits domestic holders, offers significant potential for appreciation from a total return perspective. In addition, as China returns to a more aggressive urbanisation stance, the country's significant commodity export sector should benefit. The S&P/ASX 200 has rallied for the last six consecutive weeks and is overbought in the short term. However, a sustained move below 4385 would be required to question medium-term upside potential.
Please note - the above yields are all gross of taxes.