INVESTORS are hoping that BHP Billiton can today follow the strong lead from Fortescue Metals Group into reporting season, and avoid the production downgrades dumped on the market by Rio Tinto.
Rio shares slipped rapidly yesterday as investors reacted to an underwhelming quarterly result from the company's flagship iron ore division, and downgrades to full-year production guidance in three other important commodities.
Rio is now forecasting weaker full-year production of copper, hard coking coal and thermal coal than the guidance it offered just three months ago. Full-year guidance for iron ore production, which delivers the bulk of Rio's profits, remains unchanged at 250 million tonnes, and the company was yesterday spruiking its highest first-half production of iron ore.
But many investors were disappointed by the iron ore division's performance in the three months to June 30.
Rio's global iron ore network including joint-venture partners produced 62 million tonnes in the quarter, below the 64 million tonnes predicted by several analysts, including Deutsche Bank.
Rio's share of that production was 48.6 million tonnes, a result that was partially hampered by a scheduled equipment shutdown at the Cape Lambert port.
While that result was better than the cyclone-affected March quarter, it was poorer than for the June, September and December quarters of 2011.
It looked even worse when compared with the June-quarter results published earlier in the day by Fortescue, which revealed better than expected iron ore production, and successful achievement of its goal to export more than 55 million tonnes in the year to June 2012.
The impact on Rio's share price was instant: the stock slipped 90?, or more than 1.6 per cent, in an hour. After touching $55.15, it closed at $54.44, 5? below Monday's close.
Rio chief Tom Albanese said market conditions had deteriorated in recent months, but he was confident Rio's businesses were resilient.
"Global economic conditions and sentiment dropped markedly in the second quarter," he said. "We are keeping a close eye on the pace of the US recovery, the continuing eurozone crisis and the impact of efforts to stimulate the Chinese economy on the markets that we serve."
The big resources stocks have suffered steep share-price declines amid fears that demand for commodities will fade as China grows at a slower pace than before.
But the world's biggest investor in resource stocks, BlackRock, said the sector might soon enjoy some relief as investors realised China was undergoing "the softest hard-landing in history".
"We feel there will be some levelling-off of attitudes towards commodities, particularly as and when people become more convinced that China, the main engine, is not about to collapse in a heap," said BlackRock's chief strategist, Ewen Cameron Watt. "The bear market in resources stocks has certainly helped the majors in the sense that they're the people that can get the finance, and a lot of marginal projects will fall by the wayside."