Emma Fisher is an investor at Airlie Funds Management. Investment publication Livewire Markets cited some of her views and positions last week.
One of her suggestions was to use ASX-listed shares with exposure to the “global bright spot” of the US.
The US economy is running hot, supported by strong AI-related capital expenditure and grid investment, while President Donald Trump’s protective tariffs — particularly on steel — are giving domestic producers an advantage over international rivals.
One of Airlie’s holdings is BlueScope Steel (ASX:BSL).
BlueScope reported its full-year results today, providing support for Fisher’s thesis.
The Australian Financial Review reports:
“BlueScope hiked its final dividend payout to $0.65 from $0.30 a year ago after delivering an 857% rise in net profit to $802 million in the 12 months to 30 June, up from $83.8 million a year ago. Revenue was up 2% to $16.6 billion.”
The standout division was North America, with profit doubling to more than $1 billion.
The other parts of the world are more mixed.
The outlook is important for Australia and the ASX because Australian iron ore exports are heavily exposed to Chinese steel demand.
Here’s how BlueScope showed global conditions in its presentation released today:
China’s domestic economy continues to act as a drag on global growth.
That’s an issue for domestic iron ore miners like BHP Group (ASX:BHP), Rio Tinto (ASX:RIO), and Fortescue (ASX:FMG).
One factor could help them more than anything else: depletion across the industry rather than demand growth.
One man who ought to know is Matthew Holcz, chief executive of Rio’s iron ore division.
Speaking at the Melbourne Mining Club earlier in the month, Holcz said that while demand may remain relatively flat, the industry needs to replace 800 million tonnes of supply over the next decade.
Holcz also expressed his opinion that the price of iron ore should find support around the current level for this reason, amongst others.
Whether or not the iron ore industry can get additional mines going anytime soon to bring on new supply remains to be seen.
UBS mining expert Lachlan Shaw said back in 2023 that depletion would become an issue for the industry. One major iron ore project discussed by Rio Tinto three years ago was Rhodes Ridge. The project has since progressed into a Feasibility Study.
The Australian reported on Matthew Holcz and Rio’s capital allocation strategy on 5 August:
“While Rhodes is ‘the best undeveloped deposit in the Pilbara’, there is a significant ‘but’ over whether the project gets off the ground — and that comes down to Australia’s ability to continue to be competitive.”
Rio’s iron ore division now has to compete with copper and lithium for the company’s growth capital. There is no guarantee it will go ahead, with the decision ultimately dependent on the project’s margins and outlook.
A development like Rhodes Ridge is expected to require at least $4.5 billion in investment from Rio and its project partners.
Any decision to pursue the project would be a major signal from Rio that the undersupplied iron ore dynamic is valid.
Any major stimulus out of China could bolster the case for a steel-led iron ore recovery across Asia.
Meanwhile, companies like BlueScope are positioned to continue benefiting from strong US demand.
Write to Callum Newman at Mining.com.au
Images: Unsplash & BlueScope
