THE DISTILLERY: BHP's bumpy ride

When BHP Billiton's share price hits a three-year low in the face of record production figures, you know markets are changing. This morning plenty of ink is spilled over the miner's bump-and-slump – one commentator argues that the selloff was misguided and overdone, while others think it reflects a new era of low global demand. Elsewhere, there are concerns about Asciano's investment in automated carriers at its Port Botany terminal in NSW.

First, at The Australian Financial Review, Jennifer Hewitt argues that BHP's latest production report, read alongside Rio Tinto's and Fortescue's before it, should reinforce bullish arguments about China's ability to manage its growth.

"It's true that the latest statistics that show China growing at an annual rate of 7.6 per cent are a long way from the double-digit figures the world has grown used to. But the Chinese economy is correspondingly much larger. That means continued growth of between 7 per cent and 8 per cent there should still mean very healthy outcomes for Australia's big miners – even if prices are down from their record highs. BHP managed a 19 per cent increase in iron ore production for the year, for example, after a strong June quarter of production. It is forecasting a rise of 5 per cent next year to 183 million tonnes a year. Rio Tinto is still forecasting 250 million tonnes of iron ore production for the year despite weaker than expected shipping volumes due to port maintenance. And Fortescue is, of course, ramping up dramatically to 95 million tonnes a year by the end of 2012 and 155 million tonnes a year by June next year – about triple today's levels."

But Business Spectator's Stephen Bartholomeusz says giant output figures are less impressive now that commodity prices are falling.

"A year or 18 months ago, when the 'super cycle' was still in place and prices were at stratospheric levels, the production reports of the major miners were major news because every extra tonne of ore or coal produced generated super profit margins. Today the market is much more focused on demand than supply."

Faifax's Malcolm Maiden elaborates:

"Increases in iron production in the year to June 30 are, for example, more than offset by a 20 per cent fall in the iron ore price during the year, from almost $US170 a tonne to $US134 a tonne. Iron ore had fallen further to $US129 a tonne yesterday, adding impetus to yesterday's selloff. Steel's other big input, coking coal, is down from a 2011 average of about $US290 a tonne to $US225 a tonne, higher copper production in the June year has been undermined by an 18.5 per cent decline in prices, the aluminium price has fallen by 25 per cent, oil has fallen by 13 per cent, and the price of US domestic gas has fallen by a third in the June year."

Elsewhere, The Australian Financial Review's Chanticleer columnist, Tony Boyd, worries Asciano's latest Port Botany expansion could be meaningless if cargo is loaded onto trucks that drive directly onto the nearby M5 expressway, "which is almost a car park every morning and night because of the combination of commuter and airport traffic."

Boyd also raises concerns that Asciano's chief executive John Mullen, seemed unaware of a cap on container movements at the port, after being quizzed at a press conference yesterday.

"While it is obviously important to investors that Asciano makes sensible capital investments to lift its container capacity by 40 per cent to 1.6 million 20-foot equivalent units (TEUs) it is a little worrying when the CEO knows nothing about the potential limits on growth. The Autostrad technology being introduced by Asciano at Port Botany will ultimately allow the company to lift its [container] capacity by another 75 per cent to 2.8 million TEUs. The former NSW Labor government imposed a 3.2 million limit on container movements to … limit the pollution and traffic congestion caused by trucks and provide an incentive for shippers to shift container traffic from road to rail."

Meanwhile, The Australian's John Durie likes the investment itself, but says it is marred by the company's failure to include unions in discussions, considering the hundreds of jobs that will be cut.

"Industrial relations is a two-way street, and the best way to get workers onside is to actually bring them inside the tent and work with them on new developments rather than deliver ultimatums, starting with job losses. After close to two years of tense talks, the Port Botany workers figured they had given ground to management, but now they face two years of job uncertainty, which is not exactly a recipe for productivity improvements."

In other news, Fairfax's Adele Ferguson points to a Dun & Bradsheet report showing that the number of Australian businesses delaying payment on their bills is increasing. "Company collapses are likely to proliferate," she concludes.

The Australian's Robin Bromby relays fears that so-called "agflation" could derail the global recovery, relaying fears that some food prices could rise as much as 25 per cent this year. And paper-mate Tim Boreham, who writes the Criterion column, examines two agri-shares that will be aiming to capitalise on the palaver about resources investment.

And over at The Herald Sun, Terry McCrann reckons US Fed chairman Ben Bernanke has run out of tricks to stimulate the world's biggest economy, after a disappointing testimony in front of Congress. "Pressed, Bernanke basically admitted that the policy tool kit – more accurately, magician's trick box – consisted of more QE and that's it."