Melbourne-based resource giant BHP Billiton (ASX: BHP) is scheduled to report its second half results today. Analysts expect the company to report a 30% gain in second half profit to $9.4 billion. That profit growth was driven mainly by higher prices in the petroleum division and production increases in iron ore.

Yet the stock is down 4%, year to date. And commodities are coming off a horrible month in which they lost nearly 10%. This doesn’t seem to have deterred Marius Kloppers at BHP. He’s hitched the company’s wagon to China’s growth and plans on spending $85 billion to expand production. He is going on the offensive, which is not something you do if you think the war is clearly over and that you’ve lost.

So what does the BHP Billiton result tell us? It tells us that iron ore and coal are the most firmly entrenched of the commodities in the resource market. They will be hard to dislodge and appear to give investors a kind of refuge amongst the greater gloom. While base metals and energy have suffered severe setbacks and the hands of liquidating speculators, coal and iron ore producers should (and we repeat should because these things can change) continue to ride high export prices to profits.

One thing to watch for? A slowdown in Chinese steel production. It doesn’t matter why it would happen. But if it does happen, the coal and ore stocks could suffer casualties.

Dan Denning
The Daily Reckoning Australia

Source: BHP Billiton (ASX: BHP) to Report Second Half Results Today