And I don’t know the answer more than anyone else.

However, It stands to reason that one of the best indicators that might give us an early tip on recovery is iron ore shipments.

Iron ore is the basic component of steel, which is used in bridges, buildings, ships, pipes, cars and trucks. Even concrete highways and bridges have steel rebar embedded in them for added strength. It’s perhaps the largest ingredient in the infrastructure of the industrialized world.

World production of raw iron ore averages about 1 billion tons per year, with China alone producing nearly half the total. Australia and Brazil produce nearly 20% apiece, and roughly 54 other countries make up the rest of the production.

One of the largest producers of raw ore is mining giant BHP Billiton (NYSE:BHP), based in Australia. Engaged in the mining of metallurgical and energy forms of coal, oil, gas, diamonds and other base metals, Billiton also operates some of the largest iron ore mines in the world.

The company has 41,000 employees working over 100 mining and extraction operations in 25 countries around the world. Last year, the company generated revenues of nearly $60 billion, and roughly 25% of that was profit.

Rising Shipments: A Positive Sign

One of the best places to gauge iron ore shipments is Port Hedland, in western Australia. The Port Hedland Port Authority keeps track of iron ore shipped from its docks, and May’s total was 13.39 million tons, up 18% from April’s 11.33 million tons. BHP’s portion of May’s total was 11.12 million tons.

To put this in perspective, last June – at the height of the China driven boom – BHP shipped 12.26 million tons out of Port Hedland.

BHP recently put together a joint production venture with rival Rio Tinto, PLC (NYSE:RTP) that is expected to save the two companies $10 billion annually.

Both miners are trading roughly midway between their 52-week highs and lows, and are two of the best ways to gauge economic recovery from the ground up (pun intended).

Source: BHP Billiton (NYSE: BHP): Stock of the Day

Money Morning first reported in January, that China was building stakes in some of the world’s largest natural-resource companies, which have been made vulnerable by depressed commodities prices, tumbling profits and falling stock prices. In the scant few weeks since that Money Morning report was published, Aluminum Corp. of China Ltd. (ADR: ACH), or Chinalco, has invested $19.5 billion in Australian/British mining giant Rio Tinto PLC (ADR: RTP), and China Minmetals Corp. acquired Australian zinc miner Oz Minerals Ltd.

China Development Bank has been particularly active. Earlier this week, the bank lent $15 billion to OAO Rosneft Oil Co., Russia’s state-owned oil company, and $10 billion to the Russian state pipeline monopoly Transneft (PINK: TRNFF). In return for the needed financing, Russia agreed to supply China with 15 million tons of oil annually for 20 years.

China Development Bank struck a similar deal with Petrobras Friday, agreeing to loan the Latin American energy giant $10 billion to help finance deepwater oil exploration off the coast of Brazil.

Oil exploration will be carried out with the participation of Sinopec (ADR: SHI), the Chinese state oil company, the Macauhub reported.

The contract will be finalized within the next two months so it can be signed when Brazilian President Luiz Inácio Lula da Silva visits China in May, according to Petrobras Chief Executive Officer Sergio Gabrielli.

In addition to the exploration partnership, the deal signed between Petrobras and Sinopec includes the supply of 60,000 to 100,000 barrels of oil per day in the current year. Petrobras also signed a memorandum of understanding with state company China National Petroleum Corporation (CNPC) for the supply of 40,000 to 60,000 barrels per day.

Brazil is necessarily the country that comes to mind when taking inventory of the world’s top oil producers. It currently has about 12 billion barrels of proven reserves, but that figure could grow substantially now that a number of very rich deposits have been found off Brazil’s shores.

Petrobras happened across the second-largest oil find in two decades last year when it found between 5 billion and 8 billion barrels of untapped light oil in the Tupi basin. Even more impressive are the unofficial figures from a new reservoir, known as Carioca. That field could hold 33 billion barrels of oil and gas, which would make it the world’s largest discovery in at least 32 years.

With discoveries like these Brazil, currently ranked 13th on the list of the world’s top oil producers could, could easily move into the top ten.

The only problem with the Tupi and Caricoa oil fields is production costs. The Carioca discovery, for instance, is located 170 miles offshore, more than 6,000 feet under the surface of the water, and is trapped beneath a shelf of salt 500 miles long and 125 miles wide.

Developing oil fields such as these will be very costly and with crude oil trading below $40 a barrel financing is imperative. In that sense China couldn’t have timed its investment in Petrobras any better.

Petrobras said it plans to invest $174.4 billion from 2009 through 2013, compared with the $112.4 billion planned for investment for 2008-12. The company will invest $28.6 billion in 2009 alone.

In 2008, trade between China and Brazil totaled $36 billion making China Brazil’s second largest trading partner.

Source: China Continues its Commodities Binge with Brazilian Oil Deal

• Widespread foreclosures caused home prices to fall in 134 U.S. metropolitan areas. Foreclosure filings eclipsed 250,000 in January, their tenth straight month above that figure, Bloomberg reported.

• Aluminum Corps of China Ltd. (ADR: ACH), China’s state-owned aluminum group, will invest $19.5 billion in debt-heavy Australian mining company, Rio Tinto PLC (RTP). More than $12 billion will be spent on mining assets and the rest will buy bonds convertible into shares, Reuters reported. The deal will give China unprecedented access to much-needed commodities and raw materials.

• Media conglomerate Viacom Inc. (VIA) said its fourth-quarter profit fell 69% as the recession sapped advertising revenue. “It is clear that while as cable network owners we are in a more favorable media segment than most, advertising (comparisons) are likely to get worse before they get better,” Chief Executive Philippe Dauman said on a conference call, the Associated Press reported.

• Fourth-quarter profit for Coca-Cola Co. (KO) fell 18%, but beat analysts’ expectations. The company reported net income of $995 million, or 43 cents a share, down from $1.21 billion, or 52 cents, a year earlier. “They’ve been very focused on taking costs out now that they have a strong product portfolio,” Erin Smith, an analyst with Argus Research in New York, told Bloomberg.

• Sources told Reuters that General Motors Corp. (GM) is talking with China’s SAIC Motor Corp. about selling part of its stake in their decades-old joint venture. The 50-50 venture builds and markets Buick, Cadillac and Chevrolet models in China.

• A $27 billion (A$42 billion) stimulus plan was rejected by Australia’s Senate yesterday (Thursday). Australia is heading toward its first recession in 18 years. Adamant on passing the stimulus, the government will make further concessions before the measure is voted on again, Bloomberg reported.

Source: Global Investment News Briefs Friday, February 13th, 2009

• China’s exports fell 2.2% and imports plummeted by 17.9% in November, pushing its trade surplus to a record $40.09 billion, Bloomberg reported. “The figures are horrifying,” Lu Zhengwei, chief economist at Industrial Bank Co. in Shanghai, said. “Plunging imports show that on top of faltering global demand, domestic demand is also shrinking as the economy cools.”

• Global mining leading Rio Tinto PLC (ADR: RTP) announced it would slash 14,000 jobs (or 13% of its workforce), sell more assets and halve its capital spending. “Drastic times call for drastic measures… They’ve definitely gone into survival mode, which is appropriate given the market circumstances,” Tim Schroeders, portfolio manager at Pengana Capital in Melbourne, told Reuters.

• Despite ascending unemployment numbers, Wells Fargo & Co. (WFC) Chief Executive John Stumpf said Wednesday he is seeing signs of a bottom in the U.S. housing market. “My suspicion is there is some more to go. But we’re starting to see some early signs that maybe we’ve reached the bottom in housing or close to it,” Stumpf said at Goldman Sachs Group Inc.’s (GS) U.S. Financial Services Conference, Reuters said.

• Egypt’s Orascom Telecom Holding landed a contract to provide mobile phone services in North Korea, a company source told Bloomberg. The deal marks the first foreign telecommunications deal on the recluse Communist country’s turf.

• Office Depot Inc. (ODP) will close about 9% of its North American stores and cut 2,200 jobs over the next three months, The Associated Press reported yesterday (Wednesday). The plan to close 112 stores will reduce the chain’s base to 1,163. Office Depot will close 45 stores in the Central United States, 40 in the Northeast and Canada, 19 in the West and eight in the South.

• Solar cell maker JA Solar Holdings Co. (ADR: JASO) yesterday (Wednesday) cut its fourth-quarter revenue and production outlooks as a result of declining demand. The China-based company lowered its revenue forecast to $124 million, from an earlier estimate $191 million to $220 million. The company also cut its estimates for 2008 production output to between 250 and 260 megawatts from 310 megawatts.

Source: Global Investing Roundups Thursday, December 11th, 2008

The bid was also partially kneecapped by antitrust concerns raised by the European Commission, which mandated BHP unload assets for approval.

And Rio’s net debt of $39 billion was yet another concern for BHP.

“Recent global events and associated falls in commodity prices have… altered risk dimensions. BHP Billiton is very focused on balance sheet strength. Accordingly, the greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level,” Marius Kloppers, BHP Billiton’s CEO, said in a statement.

BHP, the world’s largest mining company, announced the hostile bid last November. Its first offer allotted three BHP shares for each share of Rio, valuing the company at about $127 billion.

Rio Tinto Chief Executive Officer Tom Albanese rejected it, calling it “several ballparks away” from Rio’s value. BHP returned in February with a sweetened offer of 3.4 shares for each share of Rio. That offer, worth about $147 billion, was also rejected.

Since then, sinking stock markets and commodities prices have dragged down the companies’ stock value, making the value of BHP’s bid was about $66 billion Tuesday afternoon, Reuters reported.

The dropped bid clipped as much as 40% from Rio’s New York-listed American Depository Receipts (ADR) Tuesday, while BHP’s New York-list ADRs moved up a healthy 13% by the end of trading.

Competitors Cheer

Had Rio accepted BHP’s offer, it would have created a resource group capable of holding sway over a considerable portion of the world’s resources, including supplies of copper, aluminum, coal and iron ore.

BHP-Rio Tinto would control 14% of the world’s thermal coal and 13% of the worldwide copper supply. The company would also supply one-third of the world’s traded iron ore and 38% of the world’s seaborne iron ore trade.

Such a tight grip would have forced competitors to slash prices to compete.

“Steel makers around the world will be rejoicing today,” Ian Rogers, director of industry trade group U.K. Steel, told MarketWatch.

Source: BHP Abandons Hostile Bid for Rio

A year ago this week that BHP, the world’s largest mining company, went public with its bid for Rio Tinto, the world’s second-largest mining company. The offer allotted three BHP shares for each share of Rio Tinto – a deal that valued Rio at roughly $127 billion.  Rio rejected the offer, but BHP returned in February with a sweetened offer of 3.4 BHP shares for each share of Rio Tinto. That offer, worth about $147 billion, was also rejected.

Rio insisted that both BHP offers “significantly undervalued Rio Tinto and its prospects,” particularly iron ore. Rio Tinto Chief Executive Officer Tom Albanese noted in January that his company achieved record high production for iron ore, alumina, aluminum, bauxite, gold and copper in 2007. The company said it produced 145 million tons of iron ore last year, a 9% increase over 2006.

However, commodity prices across the board have retreated from the record highs reached earlier this year, which might make BHP’s offer slightly more appealing.

Stock valuations have plummeted as well. And at current prices, Rio Tinto is trading at a 24% discount to the value of BHP’s all-share offer.

Rio Tinto has given no indication that it has warmed up to the BHP bid, but Albanese did acknowledge a significant decline in demand from China. During a mining trip in Africa, Albanese told Bloomberg News that the slowdown in China’s economy has been more pronounced than initially thought.

“[China’s economy] is decelerating more in the fourth quarter than we saw in the third quarter,” Albanese said in an interview at the company’s ilmenite mine in Madagascar. “That is going to lead to a deferred pickup in cumulative demand for most of the things we produce during the course of 2009.”

China’s economy registered a solid GDP expansion of 9% in the third quarter – a noticeable step down from the torrid 11.9% pace set in 2007.

If BHP succeeds in its takeover attempt, it would gain control of the largest aluminum producer in the world, which Rio became by successfully bidding for Canada’s Alcan Inc. for $38.1 billion last year.

It would also control 14% of the world’s thermal coal and 13% of the worldwide copper supply. More importantly BHP-RioTinto would dominate 38% of the seaborne iron ore trade.

That’s why regulators would like to see BHP divest some of its current iron ore holdings before it approves any merger. After a five-week preliminary review in July, the commission said that it had “serious doubts” about a combination that would control more than one-third of the world’s iron ore exports.

Some analysts have pointed out that the EC has previously approved takeovers after sending a list of objections and without demanding changes or divestments. But this is not likely to be one of those cases given the global magnitude of this particular merger.

“I think BHP will review the objections and seek remedies for them,” Tobias Woerner, an analyst at MF Global Securities told the New York Times. “At least BHP hasn’t rejected the objections out of hand and walked away from the deal. The objections should be manageable, but we don’t know what other factors will be at play here.”

Source: European Commission Voices Antitrust Concerns Over BHP’s Bid for Rio Tinto