Boom times return?

[Ausprop]

could be a false start for sure, but I am going to peg yesterday as the day that I realised the boom is back. The GDP figures confirmed what I can only say is an explosion of large orders - almost a scramble amidst an inability of suppliers to keep up (yes this is supply to resources but that's where this was always going to start). Then when I saw those GDP numbers, then

http://www.theage.com.au/business/more-upbeat-data-trade-deficit-shrinks-20120608-200do.html

all set against dwindling property for sale, explosive rent increases, declining interest rates.

The confusion is the noise coming out of europe, but with the resource projects committed it may be a sideshow. Particulalry once BHP stops playing games with the Chinese and gets back to business. This could be an influence:

http://au.news.yahoo.com/thewest/business/a/-/wa/13896472/decision-looming-on-gas-hub-legality/

but I'd tentatively say strap your helmet on we could be going for a run....

 

[HotRod]

could be a false start for sure, but I am going to peg yesterday as the day that I realised the boom is back. The GDP figures confirmed what I can only say is an explosion of large orders - almost a scramble amidst an inability of suppliers to keep up (yes this is supply to resources but that's where this was always going to start). Then when I saw those GDP numbers, then

http://www.theage.com.au/business/more-upbeat-data-trade-deficit-shrinks-20120608-200do.html

all set against dwindling property for sale, explosive rent increases, declining interest rates.

The confusion is the noise coming out of europe, but with the resource projects committed it may be a sideshow. Particulalry once BHP stops playing games with the Chinese and gets back to business. This could be an influence:

http://au.news.yahoo.com/thewest/business/a/-/wa/13896472/decision-looming-on-gas-hub-legality/

but I'd tentatively say strap your helmet on we could be going for a run....

The gas hub will just move.

A shame, but it will probably go to some site they were looking at in the NT.

Typical NIMBY attiude. I mean, who would notice it 60km up a dirt track out of site from 99.99% who live in or visit Broome.

All because some traditional owner has his nose out of joint and probably left on the outer in the negotiations and didn't get as good deal as ones that agreed (or maybe nothing).

Interesting that the organisation appealing was set up by lawyers.

You know they always have other's interests at heart.

I could understand if it was 5km out of town and visible for all to see with 2000 hi-viz wearers living in the centre of town.

 

[sanj]

i thought they traditional owners had agreed to this but the protests were organised by others?

 

[HotRod]

i thought they traditional owners had agreed to this but the protests were organised by others?

You mean "rent-a-crowd"? Yes.

The EDO are supporting the traditional "owner" of the land the gas hub is on. Don't know how that differs from the traditional "owners" that agreed to it.

 

[HiEquity]

Hi Ausprop

You obviously live in Perth! 14.5% annual growth and 3.9% unemployment - that's hard not to notice out in the street.

BTW I don't view BHP as playing games. Remember that in the iron ore market they only get price certainty for a quarter of a year at a time. They would be doing a lot of research into iron ore demand and obviously they are seeing the potential for downside risk in China. The numbers at stake are too large to play games with...

The current trajectory of iron ore prices also makes it tough for the development projects too - think API, Crosslands, OPR, FMG North Star, etc etc etc. Their bankers are likely to be getting edgy! Particularly when you look at some of the capex required for these developments. FMG's T45 project, even though it was a scary price tag at the time, now looks like it was built for bargain basement prices!

Mind you the existing projects / expansions and the oil and gas projects are more than enough to be getting on with of course - it's hard to see things falling off a cliff either with all that committed. My approach is still to get maximum exposure but to assets that at the very least pay for themselves...

 

[Ausprop]

My approach is still to get maximum exposure but to assets that at the very least pay for themselves...

amen to that.

 

[Deltaberry]

No boom. No games. No smokes and mirrors.

The eastern states are getting hit. In the past 2 months over 10,000 headline job losses have occured (Westpac, DJs, ANZ, Hasties, Qantas) on the east side of the country.

Hard metals stockpiles are full in Chinese ports and right now demand is sapping very quickly. People high up don't want this product any more. Long-term contracts are being reneged and there's no where for the product to go and it's a matter of time before commodity prices crash and marginal producers are priced out of business. For all the people who advocated greater monitoring of Chinese and Indian companies buying interests in Australian mines, rest assured you'll be getting a lot less of those in the next few years so don't need to worry any more.

FMG T45 looks like a bargain at the time because it was planned much earlier. Mitsubishi has clearly stalled and plans need to be revised post-acquisition, and if it were so easy Murchison wouldn't have sold. Same with SinoSteel - no need to halt Weld Range if economics were good. I am thoroughly amused at the vast amount of Indian money (though the word vast is all relative) being thrown in to the Galilee Basin. With cost blowouts being every days (only need to look at Browse and North West Shelf), not sure what they are trying to gain there. Thermal coal is only going one way in the next few years and it is certainly not up.

Plenty of old friends in China dealing in these commodities (be it BHP, RIO, Noble, Xstrata, Glencore or PetroChina, Shenhua, CITIC etc) out there drinking mao tao with sellers or singing karaoke with buyers all day to convince them to do a deal and they are all saying the environment is so tough now and they all think it's pretty bleak going forward. The resources bust is probably around the corner.

 

[Ausprop]

and yet despite what the baltic dry index is doing (I haven't looked at that lately) and the patrons of the karaoke bars are saying, these projects are real and happening right now

 

[HotRod]

If the BHPs, Rios, FMGs of this world are happy to spend hundreds of billions of dollars in expansion then there should be an expectation that all is not about to go belly up????? Such a decision to borrow that amount of money, would not be taken lightly by either the CFOs of those companies nor the bankers that lend them the money, withouth doing their due diligence and locking in long term contracts etc?????

 

[HiEquity]

Hi HotRod

If you're referring to iron ore projects, no-one gets price certainty for longer than 3 months anymore. The terms "long term contract" and "iron ore" don't really belong together...

Oil and gas is a completely different kettle of fish of course.

 

[HotRod]

Hi HotRod

If you're referring to iron ore projects, no-one gets price certainty for longer than 3 months anymore. The terms "long term contract" and "iron ore" don't really belong together...

Oil and gas is a completely different kettle of fish of course.

Right you are.

That was referring to the longer term contracts that Woodside et al have with Japan, Korea etc

 

[Player]

Hi HotRod

If you're referring to iron ore projects, no-one gets price certainty for longer than 3 months anymore. The terms "long term contract" and "iron ore" don't really belong together...

According to hedge fund manager Jim Chanos, it's the highish iron ore price that is keeping Fortescue's head above water especially with their debt level. He has made it public he is shorting FMG in particular as part of his bearish China sentiment

Oil and gas is a completely different kettle of fish of course.

No doubt it's gidee up times in the west. Very hard for the east coaster's to understand what is happening on the ground there. I'm not sure though that the China story will continue at the current pace in the short/medium term.

What will that do to mining jobs and also the ancillary/supporting industries?

 

[HotRod]

No doubt it's gidee up times in the west. Very hard for the east coaster's to understand what is happening on the ground there. I'm not sure though that the China story will continue at the current pace in the short/medium term.

What will that do to mining jobs and also the ancillary/supporting industries?

Well, if WA had a GDP growth of 8% for the quarter compared to the 1.3% for the rest of Australia, then Australia will be in a recession come Christmas time.

I'm sure that will make the negative nannies happy.

 

[Ausprop]

No doubt it's gidee up times in the west. Very hard for the east coaster's to understand what is happening on the ground there. I'm not sure though that the China story will continue at the current pace in the short/medium term.

What will that do to mining jobs and also the ancillary/supporting industries?

I think the point that needs to be conveyed is that the investment in oil and gas will roll on regardless - and from what I understand this is in Qld as well? There is so much other stuff going on right now that if a project here or there falls over it would probably be a good thing

 

[HiEquity]

FMG is a high cost producer compared to the likes of BHP / Rio. Any iron ore price crash leaves them very exposed. Heaps of debt, burning diesel instead of gas for power, assets which are yet to be depreciated, lower production rates compared to the others to pay back the cost of their railways and other facilities.

Whereas Rio / BHP in the Pilbara are long term players whose assets hardly owe them anything anymore, mining ore of world class quality. They would be some of the last mines in the world to stop producing iron ore. Hardly anyone can mine the stuff cheaper than them. It's chalk and cheese. Then along comes Roy Hill... and the magnetite miners...

 

[vmay]

Uncertainty

You mean "rent-a-crowd"? Yes.

The EDO are supporting the traditional "owner" of the land the gas hub is on. Don't know how that differs from the traditional "owners" that agreed to it.

I have my IP in Broome. There is much conflict in the town over this issue. Its hard on the town. The Inpex deal was being negotiated when I was up there and ended up going to Darwin.

It would be good to know for sure as the current uncertainty makes it hard to do any planning.

 

[Andrew_A]

Brisbane

Well Brisbane is going quite nicely this month, just missed out on another property with multiple offers for a new listing.

Seeing something I haven't seen for 2 years which is fed up buyers, the choice isn't what it was in 2011 and there's now pent up demand with buyers who are prepared to pay to secure a property resulting in some prices I'm uncomfortable paying. Been that way for a month now, probably just a rebalance to a more healthy power relationship between buyer and seller, will see.

 

[WASP]

We heard that Mandurah rentals are starting to get hectic with multiple applications and cash offers to secure a tenancy

 

[Deltaberry]

If the BHPs, Rios, FMGs of this world are happy to spend hundreds of billions of dollars in expansion then there should be an expectation that all is not about to go belly up????? Such a decision to borrow that amount of money, would not be taken lightly by either the CFOs of those companies nor the bankers that lend them the money, withouth doing their due diligence and locking in long term contracts etc?????

What makes you think they are still happy to spend billions of dollars? Do you speak to them? I do

In fact was just in a meeting with someone reputable in these places on Thursday

Buyers and sellers are not particularly optimistic in the near future.

 

[aussierogue]

I trade the baltic dry index (its routes) and I have sat in boardrooms in china (sinosteel, wuhan iron and steel) broking iron ore deals.

China is sitting on massive stockpiles of iron ore that aint going nowhere presently. Lat time this scale of stockpiling happened was in the leadup to the Beijing Olympics and just prior gfc 1.

Chinas demand is sluggish thats for sure.

And youyr Bhp's, rios's fmg's and vales of the world like most companies cannot see past 6 months. Investment time frames are 3-5 years. So yes these bug guys have to make huge risky invesment decisisons with little or no idea what the market will be like in 1 years time.
Thats the giant ponzi scheme we are sitting on. The good news for these guys (except fmg)is that they are diversified and so large that they just go with the flow.

and btw im dam good at karoake but dont tell my wife