Bloomberg News

Xstrata Sees Commodities Rising as Euro Crisis Wanes

December 06, 2011

(Corrects fourth paragraph to describe dividend policy as “progressive.”)

Dec. 6 (Bloomberg) -- Xstrata Plc, the world’s largest exporter of coal used in power stations, expects commodity prices to rise as Europe resolves its sovereign debt crisis.

“When we get out of this uncertainty that Europe and the rest of the world is causing us we’ll see some significant price improvements,” Peter Freyberg, head of Xstrata’s coal division, told reporters in London today. “India and China continue to grow. We remain, in the six-month period, positive.”

Demand for commodities such as coking coal the company digs at Australia’s Oaky Creek is high in China, Freyberg said. “We’re seeing steel demand going down, prices in China dropping, but there’s still good demand for quality products and prices historically are still high, well over $200 a ton.”

The company is seeking to deliver “significant cost reduction across its output,” Chief Executive Officer Mick Davis said in a briefing at Investor Day in London today. Xstrata will continue its “progressive dividend policy,” Davis said. “We had a significant adjustment in dividend to get back to pre-2008 level, and we’ll continue with that policy.”

The company isn’t happy with this year’s performance at Collahuasi, its Chilean joint venture with Anglo American Plc, he said. “Collahuasi hasn’t been a great deliverer this year. It’s been a disappointing exercise.”

The company, planning $19.5 billion in spending from next year to raise output 50 percent by the end of 2014, sees demand for coal and copper above supply after delays in new projects.

Chinese Demand

Chinese demand for copper and lack of new production gives Xstrata “confidence in delivering new metal into the market in the next three to four years,” said Charlie Sartain, Xstrata’s head of the metal. “You can’t just turn on copper supply.”

Xstrata, based in Zug, Switzerland, sees demand from China rising in February after falling for the lunar new year holiday.

“The unusual thing this year is that the New Year is quite early,” said Thras Moraitis, head of group strategy and corporate affairs. “The first couple of months of the year tend to be very strong. What we’ll see this year is a slight delay in that until the new year is over in January and then we’ll have a strong February.”

Xstrata will seek “opportunistic acquisitions” to aid its growth, he said. “We are looking for acquisitions that could be bolted to our existing portfolio in a way we can create a unique value. But we are primarily focused on organic growth.”

--Editor: Simon Casey

To contact the reporter on this story: Firat Kayakiran in London at

To contact the editor responsible for this story: John Viljoen at

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