The steel industry’s titan ArcelorMittal (NYSE:$MT) has decided to write down the goodwill of its European operations by $4.3 billion due to the “weaker macroeconomic and market environment” of the continent. The effect of this non-cash impairment charge will be reflected in the fourth quarter’s results due on 6th February. The demand for steel in Europe has dropped by 8% this year and 29% overall since 2007. This weak level of demand, coming from high unemployment and drastic cuts in public and private expenditures, is expected to persist over the medium term – 12 to 24 months. The Euro-zone has not registered any growth in the previous four quarters, having contracted in the previous two. And Q4’s results are not expected when all is calculated to be much better. The Eurocoin indicator, one of the earliest estimates showing GDP growth in the euro zone area, has been negative for all of Q4 — -0.29% for October, November and -0.27% for December.
A consortium of investors led by City of London banker Ian Hannam, former BHP Billiton (NYSE:$BHP) executive Chip Goodyear, and the Polish billionaire Jan Kulczyk has been among those shortlisted for exploration of a handful of major mineral mining tenders opened up for bid by the Afghan government. The three projects – mostly involving mobilizing copper deposits – are located in the northern portion of the country where the Karzai government has more control versus the south where the Taliban is essentially in charge and has made life difficult for exploration projects in the past.
London-based Rio Tinto (NYSE:$RIO) is aiming to cut up to $7 billion by 2014 meanwhile it will increase its production of copper, iron ore and aluminum. The world’s second largest iron ore producer wants to increase output to 290 million tons/year, from 283 million tons announced earlier, which will further increase to 360 million tons/year by 2015. The company’s executives believe that aluminum and Australian coal will pose a significant challenge and most of the cost cutting will happen in these two areas of their operations – Coal and Aluminum.
The Japanese engineering conglomerate Hitachi (PINK:$HTHIY)has decided to expand rapidly in the UK’s nuclear sector by investing $1.12 billion to purchase Horizon Nuclear Power from the German firms E.On and RWE NPower who are walking away from nuclear power following the German government’s policy to reduce nuclear energy operations after the Fukushima incident. The apparent irony here is that Hitachi, based in a country that was the epicenter of nuclear disaster, is replacing the German companies. The U.K. based engineering firms Babcock International and Rolls-Royce have subsequently planned to sign contracts with Hitachi. The country currently has 10 nuclear power stations, which operate 17 reactors that fulfill about 18% of Britain’s total electricity requirements.
The shares of the London listed Indonesia based Bumi Plc, which has a significant representation in Markets VectorsIndonesia Index ETF (AMEX:$IDX), have gone up by as much as 48% since 11th October following the revelation that Indonesia’s Bakrie family has decided to split the business by buying back their stake from Bumi for $1.4 billion.
Financial irregularities in one of the firms owned by Bakries have created tension between the Bumi and Bakrie families and the latter is now looking to end the dispute. Bakrie is not only looking to buyout Bumi’s 29% stake the Indonesian PT Bumi Resources, the country’s largest thermal coal producer, but also purchase Bumi’s majority stake in PT Berau Coal Energy in the coming six months. If the acquisition is approved, then Bumi Plc will become just a holding company without any mining assets.
Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital. (read more)
The Big Trade: Simple Strategies for Maximum Market Returns
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