Freeport McMoRan at Deutsche Bank Conference Notes

Kathleen Quirk – Chief Financial Officer

Copper prices have recovered, but not enough to incentivize new supply

“You’ve seen a recovery in copper, beginning last fourth quarter of 2016. We’ve been in a period of time where copper was in the $2 plus range and then copper prices started to improve in the fourth quarter of last year. We didn’t see the wall of supply come into disrupt the copper market fundamentals as many market analysts had thought previously. And what we started to see is supply side issues come more into focus. We started to see more disruptions taking place because of labor issues or other issues in the industry, and so copper prices have recovered. And while they have recovered, they are still not at a point where the industry is investing in new dollars to replace supplies. And part of that is because of the incentive price required to build new supplies. And Wood Mackenzie estimates that that price is roughly $3.30 a pound. So we’re in a period right now where the companies aren’t making large investments in new projects. And so the longer that goes on, the longer you’ll see the situation where the market is very tight.”

Market is essentially balanced this year

“The market is essentially balanced this year, and many analysts believe that it will be finally balanced in 2018 and 2019. And so you’re left with the supply disruptions that have occurred. And like I said, year-to-date, they’re running higher than average. In the first quarter, we did see availability of scrap, as prices increase, more scrap become available. But here in the second quarter, we’re not seeing as much scrap availability as what we had in the first quarter.”

China going to be key. Demand remains strong

“China is going to be a key as it has been to this marketplace. They’ve been a very strong source of demand for copper, approximating upwards towards 50% of the market. And while the credit has tightened in China, the demand as we see it remains strong, particularly in the wire and cable markets. So we’re focused on the long-term fundamentals of this business. We think it’s a great industry to be in. And we believe Freeport is placed very well with its assets, and you can see the assets here.”

Caterpillar at Deutsche Bank Conference Notes

Denise Johnson – Group President, Resource Industries

We are seeing a good solid recovery in mining

“So, I talked a little bit about the recovery. We are seeing a good solid recovery from a really low level. If you see on the left, certainly the commodity dollar index, as the last chart has shown with it returning here in 2017. We are also seeing that our equipment is being utilized at fairly high rates. And you see the chart on the right hand side which really shows parked truck utilization overall

Mining companies are forecasting CapEx to increase

“We are also seeing that the mining companies are forecasting CapEx to increase, I’ll say, although they have been very stingy with those CapEx dollars. Wherever possible, they are looking to maintain the equipment that they have. They are rebuilding more than ever. ”

High level of interest in autonomous fleets

“One area that we’re very heavily focused on is technology, and I talked about that a little bit. One highlight that I’m very proud of is the fact that we are a supplier in production on autonomous fleets. We have two fleets in production in Australia and we have a number of customer contracts that have been signed for additional autonomous fleets to be deployed, one in the oil sands, one in Brazil, and another in the U.S. So, I will say in general, there’s a high level of interest in autonomy, mainly for the benefit that it provides for productivity.”

Technology controlling mines has changed

“So, if you look at what’s happening in mining, certainly the industry itself is poised to grow. The mining methods of the past have changed. And where we’re controlling mines from for the future from pit support is located in office buildings instead of the mine sites. So, recognizing the technology needs to be — the solution step that’s used and leveraged to a larger degree is something that we definitely see and it’s getting a lot of pull for, and I think something that really is the game changer in this industry.”

Iron ore customers are not pulling off production even at lower prices

“We are watching that really closely. I would say, in general though, most of our iron ore customers have been extremely focused on lowering their costs. So, even though pricing is going lower, they are still at a point where they are not looking to pull off from production. So, it hasn’t impacted us to a large degree. Now, I would say that there are few of those customers that are — we had thought were going to order trucks and had decided to delay the order. So, it’s just a delay. But for the most part, they haven’t — it just hasn’t stopped them from to normal activity.”

One big customer trying to be fully autonomous by 2025

“I was talking to a customer last week about autonomy and they have a goal to be fully autonomous on every mine site by 2025. And they have thousands of pieces of equipment. So, you’ve got these bold goals being placed out there. So, clearly, the momentum is moving. We’re getting calls every day from mining customers asking for us to come in and talk to them about what we can do together. So, there is certainly a pull there. And so, it will happen, it’s just how fast. There is — it still is the technology that’s evolving. And we do have a lot of tech companies out there that are also trying to fill that space. So, it will be interesting to see how it evolves, but it will clearly go there.”

Alcoa (AA) Presentation at Bank of America Merrill Lynch Conference

Roy Harvey – President and CEO

China is key in the aluminium industry

“when we look at the world today, we think about the impact that China is having on the entire aluminum value stream. We see a constructive market. We see a bauxite market that is balanced. And any excess bauxite that might be produced, there’s an insatiable appetite in China to bring that in-country in either stockpile or use….The entire world market, we follow the alumina price index, but it’s very much tied back to Chinese demand and the number of cargoes going in there.”

A balanced market for alumina

“we continue to see a balanced market through a small surplus. We’ve seen some ups and downs in prices over these last 12 months, from the end of 2015 where we saw simply too much alumina in the market to a period of time in the middle of 2016 where prices had recovered very significantly to the latest headwinds that we see today, although it starts to look as perhaps we’ve reached the plateau as China starts to buy alumina again.”

three connected markets

“we see these three constructive markets, each one of them feeds into the next – bauxite into alumina, alumina into aluminum. But across the board, I see a lot of opportunities for the future.”

China drives world demand in the bauxite market

“the vast majority of bauxite demand sits in China. There is some third-party demand outside, but for the most part it’s a China story. I think what we’ve seen over these last few years and we’ll continue to see is that China continues to struggle to find very high grade, very cost efficient bauxite mines to the point where they actually mine some bauxite underground.”

Higher costs making miners selective on bauxite mining

“with bauxite prices moving up slightly, as well as coal prices that are directly tied to both alumina and aluminum in China specifically, you’re starting to see that cost push that’s driving a higher cost and, therefore, they have a lot more thought about how can they run their plant more efficiently. And that drives them to be more selective about the bauxite that they use.”

Freeport McMoRan 4Q16 Earnings Call Notes

Freeport-McMoRan’s (FCX) CEO Richard Adkerson on Q4 2016 Results

Don’t give bows for Act I when the audience is looking for Act II

“as I started thinking about my presentation today I recall a comment that Jack Welch made several years ago and it was, ‘don’t be giving bows for Act I when the audience is looking for Act II’, and I know everyone here is focused on Indonesia. It’s the focus of our senior management team as we go into 2017, but having said that I’m very proud of what our team did during this past year.”

Background on Indonesia

“In 2009, the Government of Indonesia passed a new mining law and implement new regulations over, the law was passed in 2009 and it took time to put regulations in place and really the governing regulations were not completed until 2012. The law provides specifically that existing CoWs remain in effect until they expire. It also instructed the government to seek amendments to the CoW make contracts of work more consistent with the new mining law within one year.

We actually, began discussions with the designated senior representatives of government in 2011. And in 2012, the government established an evaluation team early that year to review CoWs. We’ve been in discussions with the government since 2011, 2012, but have never been able to reach a mutually acceptable agreement on reconciling the contract of work with the new mining law. The law says that the contract remains in effect.

In early 2014, concentrate exports were halted for more than six months following a troubling January regulation on exports. We didn’t export for more than six months. It cost the government roughly a $1 billion in taxes and royalties, it cost us slightly less than that. But a very substantial amount. In that year, we resolved the ban on exports by entering into an MOU with the government, in July, that covered six main points. Exports, smelter development, divestiture, all of these were subject to negotiation of legal and physical certainty and an extension of our operations from 2021 to 2041.

It was contemplated that that MOU would be resulted amendments to the CoW in six months. The government changed in late 2014, the MOU was extended in 2015 and we continued discussions with the government. That led to the government providing our company a letter of assurance regarding extension of the CoW, regarding legal and physical certainty beyond 2021. And it was that assurance, in that letter and in the MOU and in the CoW, the government has, in Freeport have honored this CoW since the first one was signed in the 1960s, and the new one signed in 1991, that has given us the confidence to make the ongoing level of investments that we’ve been making and developing our underground resources.

Now just in January of this year the government has introduced new regulations and these new regulations require CoW holders to convert to licenses called IUPK in order to export, and with a license in and of itself there is no assurance of legal and physical certainty and we have been unwilling to give up our CoW to go to strictly a license. And so, what I want to do now is, and this is in our slides and so you can review this and follow up with questions, but I want to point out what our contract of work actually says.

If we are not allowed to export it will have a significant impact on our company

“So, we’re committed to start working immediately on that. We’ve been given indications that we will be allowed to export, but I want to note specifically, we have not yet been approved for that. If in fact, we are not allowed to export, the significant impact on our company. Each day, it’s 70 million pounds of copper and 100,000 each month — 70 million pounds of copper and 100,000 ounces of gold for each month. The nature of copper concentrate is that it’s bulk material and we don’t have the ability to inventory this to any great extent. We would be allowed to ship domestically to the smelter at Gresik and we would have to restructure our business to allow us to do that, but it would be a major curtailment of our business. Unlike 2014, at this point where our company is not in a position to maintain the existing operations without being able to export.”

At this point we don’t believe that we will have to take steps to curtail operations

“So, we would have to take steps to curtail operations, curtail costs, that means very large layoffs and the cutbacks in capital spending, and we have developed plans to do that. I will say we don’t expect to have to do that based on very recent discussions with the ministry. But we — it still remains for us to get these exports approval and we’ve been given assurances that we will.”

There is the option of international arbitration

“We have the rights to pursue claims against the government in the form of international arbitration. And our legal team advises us that our case is very strong in doing that. We have consistently represented to the government that we don’t want to do that, I don’t believe that would be advantageous for us, but I also think it would be very negative for the Government of Indonesia. So, we have and as long as we have the opportunity to try to resolve these matters in good faith we’ll continue to do it through trying to reach an amicable mutually agreeable situation. But if we get to that point where we can’t and that point would include not being able to export, then we would be left no choice and we’re prepared to do that.”

EPA regulation is important to us

“The area that we’re watching that could have a big influence on us is EPA regulations. Because we inherited legacy environmental obligations all over this country from historical operations that go back into the 19th Century. And we just entered into a settlement that you may have seen with EPA and the Navajo Indian tribe in the Four Corners area with some significant historical uranium clean-up sites. We were very pleased with that, the government I going to pay significant part of that and we’re going to deal with some of those obligations on behalf of our company. So, these EPA regulations which is a big focus of the new administration is important to us.”

Caterpillar at Credit Suisse Conference Notes

Denise Johnson – Group President-Resources Industries

Increased optimism among mining customers

“As we talk to our mining customers, we clearly see that they have some increased optimism certainly with commodity prices improving their financial viability improving they do have an optimistic outlook moving forward. Yes this has not yet translated into any tangible machine sale increases for Caterpillar. At this point in time, the focus of our mining customers continues to be and maximizing the utilization of their existing assets, they are getting more productivity, improved levels of performance out of that existing fleet. Certainly, we have seen an increase in aftermarket part, a trend upwards through this year, and we expect that could continue beyond this year, certainly more rebuilds, very tight focus on maintaining the fleets at very high levels. Machine replacements, we do see coming over time. Certainly, the age of the fleet are getting older, but there certainly is a heavy focus, as I indicated earlier, on getting every, every available hour out of the existing fleet before a repurchase would occur.”

Integrating technology is the game changer for the future

“And certainly I would see the game changer for the future is going to be an integrating technology not only with the existing products that we have in the field, but also moving forward with solutions that allow technology to even provide additional levels of productivity beyond what we see today. And that would mean everything from longer cycles before repairing to continuing to improve productivity and up time in the fleets, and that’s why we’re looking very heavily to partner with our customers to do just that.”

We are not seeing orders at this point although there are things to be positive about

“while there are things out there to be positive about, we are not seeing orders at this point. We still expect the first half to be a little softer. It was acquirer uptick in the second half. And to make sure that we have our cost structure in place, so that we can deliver on expectations and hit those incremental targets that we’ve committed to”

Don’t see much more decline in dealer inventories

“So going back to dealer inventory I would say over the – dealer inventory overall are about at levels. We don’t see much more decline in dealer inventories overall. We’ve taken out over the last year and a half over $1 billion of inventory between dealer and Caterpillar in the Resource Industries. And so we see a translation of – there may be some pockets in Saudi Arabia for instance where we have some large tractors or in South America where we have some troubles. But there would be very small pockets of excess inventory overall.”

Amy Campbell

Higher prices for copper and iron ore should impact after market sales next year, but still don’t see an increase in new equipment

“the mining prices have gone up meaningfully since the third quarter release for both copper and iron ore specifically. And we believe this will impact aftermarket part sales next year. However, we still do not expect 2017 to see a significant increase for new equipment sales in mining.”

Construction has been strong in China

“Construction in China has been strong this year and our base cases for this to continue, so potential monetary of fiscal policy changes could quickly reverse course. Machine sales into many developing countries like Brazil are such low levels has been likely that they could get worse and while incremental infrastructure bill is a long overdue and would be good for Caterpillar, we would not expect much impact in 2017. So, now let’s focus on the concerns.”

Joy Global FY 4Q15 Earnings Call Notes

Ted Doheny

2016 should be another rough year

“The mining industry in 2016 will be defined by strained cash flows, further austerity measures and asset consolidation. The net effect will be the third consecutive year of double-digit decline in capital spending.”

Have had positive developments in copper markets

“In recent months, we’ve seen some potential positive developments in refined copper market. Our original estimates expected refined copper markets to be in surplus until 2017. However, the production curtailments that have already been announced could ship to refine market to a deficit as early as next year, which could support improved pricing and drive project investment.”

Facing continued headwinds in coal

“One of the largest headwinds we continue to face is in U.S. coal markets. The combination of regulatory forces and a seemingly unlimited supply of abundant low-cost natural gas is transforming the U.S. electricity industry. Although coal will continue to play an important role, we now expect that coal burn in the electric power sector could decline nearly 100 million tons in 2015.”

Coal CapEx more likely to bottom in 2017

“we see U.S. coal, which we’ve been now following for three years. We see that in the next 12 to 18 months. The data we look at is what our customers’ CapEx has been out there and we saw that’s pointing down to bottoming at 2017 on public data. So we just have to be prepared for that to take another step down in ‘16.”

Joy Global 2Q15 Earnings Call Notes

Everything down a lot

“Bookings of $745 million in the current quarter were down 29% versus the year ago period. Orders for original equipment of $150 million were down 57% and service orders of $595 million were down 15%’

Operating profit down 28%

“Operating profit, excluding $24 million of restructuring and non-cash pension settlement charge, totaled $94 million in the second quarter, down 28% from the second quarter of 2014.”

We certainly have seen our end markets take another step down

“we certainly have seen our end markets take another step down. Compared to the first quarter, we’ve seen met coal prices drop 21%, iron ore fall 11%, thermal coal fall 8%, and natural gas drop 20%. The combined impact of these forces has created additional headwinds to our business and we’re seeing this in our bookings.”

Customers now projecting double digit declines in capex through 2017

“The extended downturn in commodities has put pressure on our customers under increasing pressure. Reduced cash flows and increasing debt levels are forcing our customers to shift to austerity measures, delay service work, and withdraw our original equipment expansion plant. Overall, our mining customers are now projecting double digit declines in Capex through 2017.”

China’s housing market is the driver of seaborne commodity prices

“Given the importance that China’s housing market plays for many seaborne commodities, including copper, iron ore and met coal, a healthy Chinese housing market would have an impact on demand for these commodities.”

Seeing improving copper production

“Over the last month, we’ve seen some improvements in global copper markets as the expectations of stimulus in China along with an improving housing market in the U.S. had driven expectations for increased copper demand in coming months. Additionally, we’ve seen improvements in global copper production as production rates have reached their highest level since last June, which we believe will help our service business over the coming months.”

Met coal markets have deteriorated significantly in recent weeks

“Met coal markets have also deteriorated significantly in recent weeks. Current spot prices are trending in the $85 to $90 range, although reduced spot market transactions are creating limited visibility into the market. The 25% decline since beginning the year has left met coal prices at levels not seen since 2006 and this has certainly impacted the project pipeline. ”

Global steel production has contracted

“Global steel production contracting nearly 2% year-to-date has reduced met coal demand, at the same time, the forecast for steel consumption had been reduced to just 0.5% for 2015.”

Currencies have offset supply curtailments

“While the nearly 40 million tonnes of supply curtailments announced since 2012 have begun to impact the market, the significant currency decline in major met coal producing regions has affectively muted the supply adjustment process, leaving the market oversupplied. ”

Our customers are definitely in a distressed state

“our customers are definitely into distressed state”

Bought Montabert

“Montabert offers an interesting opportunity for us in the hard rock space. If we look at the business, we’ve actually been looking at this for eight months to your point of an auction. We found about – we know a lot about Montabert, but we saw it pop out with our MTI acquisition, is a critical part of that business and this was a critical component where they had high margins and also a world-class piece or a component with their rock breaker, and we saw it in the MTI business for their drifters and the drills.”

We knew the business and we knew it was a bit of an orphan

“we know this business, but it was somewhat of an orphan child with Doosan. And with Doosan, they bought it with the bobcat, so Ingersoll Rand put it in the bobcat package, so 70% of the business was related to construction with the breakers.”

Tough markets forcing us to get better

“As far as the share, I do think these tough markets are really making us get better and going after all the business and as we highlighted, our investment right now is in service and we’ve talked about the Surface centers, but also on the product development. The previous question, investing in the consumables, investing in our Surface products, so do believe we’re gaining share in a tough market with the third party well fitters and the pirates that are going after that business, I think we are gaining.”

It’s tough to say we see things bottoming anywhere

“Boy, it’s tough for me to say seeing the bottom. We see where it’s bottoming, as I shared in the last quarter, we thought the U.S. was bottoming, and boy, it took another step down. We did highlight, we saw Australia take a bump up and we’ve been talking about that for a while and that where we seem to gain there within — in the service bookings and so that is optimistic. We’ve also seen our customers now talking about the delivery slots into 2016 in both in the U.S. and Australia, and what that means is, they start locking those in.

So, see Australia bottoming, see some positive actions, also see some China opportunities but then again, it’s taking share, so getting our service business growing in China. ”

I don’t see much optimism from our customers. They’re shutting down more mines

“I don’t see the optimism there. I think the customers who are out there are truly analyzing where they are in their costs and where they’re in their cost curves. If they have mines that are well above the cost curve, if originally those were taken out, I think that is their price goes down, takes another step, it’s going to knock more mines out.”

Looking for acquisitions

” as we look at our M&A or kind of the acquisition, we are looking at things that match our strategy. To accelerate our business into hard rock, we need critical components to make that go faster, because the new product development just takes a long time. So we’re looking at things in the hard rock space and still in that 100 to $2 million [ph] range. We are not looking at something big, we are always looking at service companies. ”

Headline EBITDA multiples obscure the value

“Obviously the multiples are going to go up when the EBITDA has gone down and so mining companies are being hit on an EBITDA basis just like we are. The good news is the acquisition. We bought a company that’s been very stable, and we do have visibility into how we are going to improve that business, integrate it into Joy. So it’s one thing to talk about the headline valuation, EBITDA multiple those are going to be in the nine to ten type of area, but with synergies, you buy that down to seven – six, seven over a pretty short period of time.’

Freeport McMoran at Deutsche Bank Conference

Kathleen Quirk – EVP & CFO

Seeing global growth continue at a moderate pace

“We are seeing the U.S continuing to grow at a moderate rate, and we are seeing stimulus activity help economies in Europe and Japan, and also talk about stimulus in China.”

The swing for copper comes from the supply side though

“But the real underpinning of the market comes from the supply side. Demand — copper is very, very significant in the economy, it’s very important to the global economy. But it’s a market where the supply side is constrained.

You see things like disruptions going on all the time, labor disruptions, weather related issues, technical issues, political issues; there is a whole host of things that impact supply.”

Market conditions have led to under-development

“the market conditions over the last few years have been such that no significant new projects are being developed. So it’s going to create a gap in copper supply as we go forward. We think that’s going to be constructive for the market and where we’re positioned at FCX; we’re very well positioned to participate in this with our large low-cost ore bodies with expansion potential.”

Demand growth is expected to outstrip supply over next 10 years

“This is from Wood Mackenzie. You look over the next 10 years; they’re assuming global growth averaging about 2.5%. That works out to 7.6 million tonnes of copper demand over the same period the existing mines are expected to fall by 3.1 million tonnes. So you need over 10 million tonnes of new supply to be able to make up for this. And that is significant, that’s a significant percentage of today’s supply — of today’s mine production. In 2014, the top 10 mines in the world produced less than 5 million tonnes. So you make it a lot of big mines to be able to meet the shortfall.”

IPOing the oil and gas business

“Well we are working on a registration statement that would be filed, that would give us the opportunity to consider the IPO this fall and so, we expect to be filing a S-1 registration statement this summer, and we’ll have the opportunity to consider in the fall. ”

Going to sell less than 20% of it though

“as I mentioned we’ll file the S-1 during the summer, and what we’re talking about is selling a minority interest, the minority position in the oil and gas subsidiary. So it would be somewhere and likely below 20% because we do get — we do have some advantages, some tax advantages of consolidating that entity. So it would likely be less than the 20% that we sell through public.”

Industry production has not met expectations this year

“most market observers are expecting a small surplus this year. Now that started out higher and over time has declined because production has not — from the industry has not met expectation.”

It’s been very hard to bring on new supply

“Its very, very difficult to increase copper production as we saw, we’ve had incentive pricing for several years, back 2010, ’11, ’12 you had prices above $3 averaging between almost $4 in some years, and there is a lot of capital available to our industry. Lot of big companies in our industry interested in copper and even though there was a lot of desire to expand copper production. It really has not been a meaningful increase in production because mines are aging and production declines at the same time. So, again we just reiterate our view that this is, this is one of the most positive commodities from a fundamental standpoint that you could be in “

Caterpillar 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Construction sales were down, dealers lowered inventory

“for construction industry, sales were down $98 million, the profit improved a $194 million or about 67%. Now for sales on the plus side construction had positive price realization. On the downside, volume was little lower and most of that was from dealer inventory reductions as dealers lowered inventories a little more in the third quarter of this year than they did in the third quarter of 2013 for construction.”

Lower demand in Asia/middle east, better demand in US, small improvement in Europe

“We also had little lower demand throughout most of Asia including China and weakness in the Middle East and in the CIS. On the plus side demand was up in North America and we had a small improvement in Europe.”

We’re still positive on 2015

“As we look towards 2015 from an economic perspective, we think there is a reasonable likelihood the world economic growth can improve that in 2015. In the developed countries, growth-oriented monetary policies we think could support continued modest improvement.”

Chinese government has slowed growth

“the Chinese governments push from structural reform has slowed growth some and the ongoing uncertainty around the direction and timing of fiscal policy and monetary policy in the U.S. could temper business confidence. ”

Just because inventories go up or down doesn’t mean a whole lot

” just because inventories go up or down doesn’t mean that they’re – themselves that doesn’t mean that it’s well managed or poorly managed. There are lot of seasonal impacts that go on during the year in construction”

Rundown of construction around the world

“In terms of construction, it’s a mix bag around the world. We tend that we live in the U.S. and we get influence by what we hear in the U.S. a lot and it’s been actually pretty positive, it’s been quite a bright spot although, I wouldn’t make the pitch that allow us better that doesn’t mean it’s great. We are I guess 7 to 8 years now past where the peak was and that was ‘06 and ’07. So, we still have a ways to go to get to where we would think it’s really good but it has been better. Other parts of the world it’s a little bit of a different story. China has been week, our share there has been pretty good and rising but that doesn’t offset a weaker industry.

Europe has been flat to slightly up for us which I think is a surprise to a lot of people but again you kind of have to think back to where it’s come from and how low it got. My comment about U.S. not being back to peak goes even more so for Europe, there is a lot of room for Europe I think to improve; they can ever get economic growth kicked back in there.”

Obviously watching oil prices pretty closely

“I just want to add here its Doug here again. We are obviously watching oil and gas prices very closely. We are talking to, trying to stay close to our customers on this and what they’re saying and I think you’re seeing their quarterly announcements come out and generally the feedback we’ve been getting that say 80 to 90 somewhere in there on a sustain basis. Certainly we’ll take that really educated top half of it but there is plenty of room for reinvestment like Mike said it’s still where it was a couple of years ago.”

“I think you see low 70s on a sustain basis, there would be a chill cross the market and I’d say gas coming down below three substantially on a sustain basis may do that as well. ”

Election in Brazil this weekend

” I’m also optimistic in Brazil although there is election there at this weekend but both candidates, both parties are talking about reflecting the economy and Brazil is always used infrastructure as a way to do that.’

Inventories are basically back where they started

“I think this year if you look at dealer inventory changes I mean there have been changes by quarter, but by in large they’re likely to end the year about where they started.’

We see flat to up next year

“I think that’s the case for all of our — I mean this is worldwide comment but for all of our segments. We said flat to slightly up next year and we don’t see either energy or transportation, construction or resource industries being kind of far from that. It looks pretty flat up a little for much of the business”

BHP Billiton 1H14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Maintaining production guidance

“We have retained full year production guidance for all our major commodities: Iron ore, of 192 million tonnes, our share; petroleum, of 250 million barrels of oil equivalent; metallurgical coal, of 41 million tons; energy coal, of 73 million tonnes; and copper, of 1.7 million tonnes.”

Brownfield expansion projects to generate 16% production growth through 2015

“We project that over the 2 years to the end of the 2015 financial year, our low-risk, largely brownfield projects and productivity-led gains will deliver production growth of 16%.”

Rebound in metallurgical coal output

“A strong rebound in metallurgical coal supply lead to an 18% fall in our average realized price, and this reduced underlying EBIT by $520 million.”

Focused on productivity

“A strong rebound in metallurgical coal supply lead to an 18% fall in our average realized price, and this reduced underlying EBIT by $520 million.”

Measure capital efficiency in terms of return on net operating assets

“Our productivity agenda has delivered an increase in return on net operating assets, which is a true measure of our capital efficiency.”

China growth stable but strong

“China remains the primary driver of demand. In the 2013 calendar year, its rate of growth has stabilized but still remains strong. It’s expected to remain above 7%. The government continues with its reform agenda, which will move China towards a mature consumption-led economy.”

Iron ore cost curve to flatten. Lower prices.

“in iron ore, we expect significant growth in low-cost supply that will exceed increases in demand from China and elsewhere. The cost curve, as you see, will flatten, as higher-cost margin supply is displaced, and this will lead to lower prices and lower volatility.”

Copper fundamentals remain attractive

“In the near term, copper inventories are expected to remain at reasonable levels. But in contrast to iron ore, the long-term fundamentals are attractive. Rising strip ratios and grade decline and the lack of high-quality opportunities ready for development now will steepen the cost curve.”

Focus efforts on fewer basins

“We will focus our efforts with greater force on fewer basins, on those basins where we can generate our highest margins and greatest value: iron ore in the Pilbara, metallurgical coal in the Bowen basin, copper at Escondida and the Andean copper belt, Petroleum in the U.S., and potash in Saskatchewan.”

We’re not going to keep investing in Met coal, but we will maximize production

“as you’ve heard me talking about it, because of the margins in coking coal and the returns, we’re unlikely to invest in further increases in production, but we’ll complete those underway, and we’ll ramp them up to the maximum extent possible.”

Things may start to get better for Met coal though

“I don’t have quite such a negative outlook going forward. I would like you to think more positively about our results…There has been a lot of recovery in the market — or in the production I should say, from Australia because of the recovery from things like floods. That’s coming to an end. And as we look forward, there’s less growth in the next few periods. We’ve seen some announcements just overnight about some of the cost challenges that we’ve faced [ph] from competition in North America. Some evidence of that slowing. The pickup in markets, particularly in the developed economies and the growth in their demand for steel will almost certainly benefit metallurgical coal. And we started to see some quite good steel numbers coming out of India, which in the long term has no metallurgical coal and will have to import.”

Near term iron ore price risks to the upside

“I think we would say, if anything in the next quarter, probably the risks or maybe slightly to the upside”

Unlikely to be big shocks from China to iron ore. Longer term, managing the economy

“A lot of things go on in China at the moment that don’t always eventuate in quite the same reduction in steel production that you think — I mean, there’s a lot of work that the government is doing, in some cases, using their control of the debt markets to lead to some form of restructuring of both the iron ore and the steel industry, but ultimately we think will actually improve the move towards being a middle-income economy, more competitive and more growth, and will therefore attract, in the medium-term, more iron ore from us and other suppliers outside of the country, which means that — I don’t think we’re looking at big shocks, if you like. ”

We’re not at the top of the cycle

“Can I just jump in? We’re not actually at the top of the cycle. Andrew, this result that you’ve seen is primarily driven by our own self-help and our own productivity…we certainly don’t feel that as things sit at the moment, we’re finished with our productivity gains and — or that we’re operating at the top of the cycle. “