At least for a while, the headline above might have said, "Hu Will Feed the Chinese Monster?"
Last week, amid growing concern about his nation's ability to acquire sufficient natural resources to meet the demands of a rapid industrialization, Chinese President Hu Jintao spent several days in resource-rich Australia. The primary attraction: facilities operated by such big mining companies as Melbourne-based BHP Billiton
Given Australia's array of resources, and China's voracious appetite for all manner of metals, minerals, and energy, trade between the two countries zoomed upward by 35% in the first five months of this year. Nevertheless, China reportedly remains concerned about Australia's close ties with the U.S.
The companies that Hu and his 100-person retinue visited are among those most likely to benefit meaningfully from Chinese industrialization. Billiton, for instance, has achieved a $193 billion market valuation, and it should derive big benefits from China in the years ahead. It operates from locations almost worldwide, and most of its products, including aluminum, base metals, carbon steel materials, diamonds, and petroleum, are needed throughout the developing world.
Rio Tinto is London-based, although it produces borax, titanium dioxide, salt, talc, and iron ore (all of which find their way into applications in China) on five continents. Currently sporting a $98 billion market cap, it's in the process of spending $38.1 billion for Canadian aluminum producer Alcan
Beyond that, the group has been a hotbed of takeovers and rumors of same. In March, copper producer Freeport McMoRan
Both before and after its agreement to buy Alcan, Rio Tinto has been named in the scuttlebutt as a Billiton target. In fact, one day last week, the rumor du jour had Billiton teaming up with Rio De Janeiro-based mining giant Companhia Vale do Rio Doce
So with nearly runaway demand in China for everything from aluminum to zinc, I'd suggest that my Foolish friends keep a close eye on all the companies mentioned above. And with the deal activity in the sector being what it is, it'd probably be a good idea to use a scorecard.
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