Saturday, January 3, 2009

China increases shipments of iron ore

BHP Billiton said that China was increasing it's shipments of iron ore Friday. Here's the story:

BHP Billiton appears to have boosted December Pilbara iron ore shipments and may have been spared from most of a flagged 6 million tonnes shortfall from its 2008 sales target.

As spot iron ore prices rebounded somewhat in December and Chinese iron ore demand showed some signs of strengthening, BHP increased the number of ships loaded at its Port Hedland berths.

In November, BHP said a sharp slump in Chinese iron ore demand meant annual sales would probably be down 6 million tonnes from a target of 130 million because steel mills could not take contracted shipments.

But judging from the number of ships that left BHP's Port Hedland berths last month, the miner may fall only 1 million or 2 million tonnes short of its target.,28124,24863027-643,00.html

It was a big surprise to Wall Street. But not here:

Then news that China was going to have an early settlement on iron ore shipping costs drove the stock higher. If China wanted the new contracts to start in January instead of April, didn't anybody think that China was trying to game shipping costs? So the game was up for those that shorted this number...

And look at Freeport-McMoran Copper (FCX 19.80) again. This stock wouldn't fall in yesterday's 250 move down. It was sold by those who had to own a dividend paying stock.

Freeport (FCX 26.74) moved 35% from 19.80 to 26.74 since I mentioned it. But now that Wall Street has confirmation that commodity prices, may not in fact collapse, and that they are seeing a pick-up in demand, the FCX bulls will go all over this stock. It took three weeks for the first 35% move. The next move will be bigger and faster and quicker.

Look for upgrades on this number next week. Take a look at the above chart on FCX. Does anybody think that this stock isn't ready to move? Where do you think it will go? I say you get 10 points in 10 days. And a 37 dollar number by January option expiration.

The January 30 calls are cheap at 60 cents, and the February 35's are only 77 cents. For less than a buck and a half, you can get action for two months.

And that's diversification for a hedge fund manager!

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