BHP Billiton (BHP) Dips on Poor Industry Outlook

Michael Teague |

BHP Billiton Ltd. (BHP) , the world’s largest industrial metals and minerals company, saw shares drop in Tuesday trading in keeping with an industry-wide trend that could indicate the beginnings of a downturn for mining stocks.

Mining Stocks in Trouble?

While most of Wall Street was lower on Tuesday, miners have been running in to headwinds recently from projected 2014 oversupply for profitable metals such as iron ore and copper.

While BHP has made a habit of posting record-breaking iron ore production every quarter over the last few years, the company could soon find itself dealing with a predicament resulting from slower growth out of China, the world’s biggest consumer of iron ore and copper.



Indeed, like many of its peers in the industry the company has streamlined its business in order to focus on China’s seemingly endless appetite for hard commodities, selling-off underperforming and less valuable concerns in the process. But even before signs of a supply glut began making the rounds, BHP was running in to trouble with its operating cash flow.

Earnings Report Shows Less Cash

For the fiscal year that just ended in June of 2013, the company reported that net operating cash was down nearly one quarter from the prior year, from 2012’s $24.4 billion to $18.25. Furthermore, earnings have been under significant pressure from a nearly 20 percent drop in the spot price of iron ore.

Shares for BHP were down 1.3 percent in midday trading to $64.86, and have pared back nearly 15 percent in 2013.

 

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