By Rebecca Keenan
July 29 (Bloomberg) -- BHP Billiton Ltd. and Rio Tinto Group, the biggest and third-largest mining companies, had their profit estimates raised by as much as 40 percent by JPMorgan Chase & Co. because of rising iron ore prices.
Rio’s net income may be $6.7 billion next calendar year, up from JPMorgan’s earlier estimate of $4.8 billion, analyst David George said in a report dated yesterday. BHP may have net income of $8.3 billion in the year ending June 30, 2010, up 37 percent from George’s earlier estimate of $6.1 billion.
Iron ore for immediate delivery to China, the biggest buyer, is trading at the highest level this year thanks to strong demand from steelmakers, George said. The price is now 25 percent above the annual contract prices agreed in May by the two suppliers and steel mills in Japan and South Korea.
Mills in China still haven’t agreed on annual contract prices with London-based Rio and Melbourne-based BHP, the world’s second- and third-biggest suppliers. BHP’s profit for the year ended June 30, may be $10.1 billion and Rio’s profit this calendar year may be $4.4 billion, JPMorgan said. The two companies report half-yearly earnings next month.
The gains in the so-called spot price means annual contract prices may rise 10 percent for the year starting April 1, compared with JPMorgan’s earlier forecast of a 10 percent decline, George said.
JPMorgan increased its long-term price forecast for contract prices for iron ore fines, the benchmark grade, by 25 percent to $50 a metric ton. The bank also raised its price forecasts for industrial metals because of the prospects for a second-half rebound in demand driven by expanding worldwide factory output.
To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net
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