London Calling - June 2 2004
Published by MAC on 2004-06-02London Calling! June 2 2004
Into the valleys of dearth ride the 500:
There are three main "lists" which annually rank the world's most powerful companies: Forbes500, Fortune500 and the Financal Times Global500. The latter is probaby the most reliable and informative since it's based on assessment of market capital - the actual amount of funds available to a company with which to do its business.
Last week, the Financial Times published its 2004 version of the ratings (based on figures
available at the end of 2003).
Bill Gates has at last surrendered his top position, with Microsoft giving way to General Electric as the world’s biggest multinational. Not surprising - in the light of recent scandalous revelations – Royal Dutch Shell has lost out as the world’s second biggest oil/gas company to BP (although the British company’s market capitalisation fell by almost a third last year).
ExxonMobil remains the world’s biggest oil and gas company (and the third biggest corporate) having increased its market capitalisation by nearly thirty billion dollars, to US $263,940 million Just this increase alone was almost equal to the total market capitalisation of Rio Tinto. In fact, as in previous years, ExxonMobil has more cash resources to call on than the entire global mining industry put together. This is even if we include RWE, Alcoa and Norilsk Nickel, three major companies which, though highly involved in mining, are classified otherwise.
There’s been one noteworthy change in the global mining order since 2002. Rio Tinto no longer occupies second position but has ceded it to Anglo American. The difference between them is, however, less than a billion dollars (AAC: US$33,919; RT US$33,168). Not surprisingly BHPBilliton remains the leading miner, with a call on capital of US$54,689 million – indeed, the Australian-British conglomerate boosted its position from number 88 among the Global 500 in 2002, to number 71 last year.
CVRD, the Brazilian mining conglomerate, has climbed from 334 to 275, reflecting the company’s considerable expansion and joint venturing of late Barrick, the only dedicated Canadian mining company in the Globa500/2004 has fallen a few points but Alcan has gone up by fifty, while Lafarge, the world’s most important cement company, has done a nose dive, slipping from 178 in 2002 to 404 in 2003.
Caterpillar, the biggest single provider of equipment to the mining industry, remains in its premier slot as the world’s most important engineering equipment manufacturer.
Of course we mustn’t forget the Banks, without whose support hardly a mineralised sod would be turned; nor the insurance companies, without which no major mining project could get very far. Citibank stays at number one worldwide, while HSBC, the British bank, is now number 2. AIG of the US is the most highly-capitalised insurance company in the world, followed by Warren Buffet’s Berkshire Hathaway (GeneralReCologne).
League tables
Here then are the mining and mineral related companies listed in the FT Global500
Rank Company Name Country of Origin Market Capitalisation (US$ million) 71 BHPBilliton Australia/UK 54,689.40 158 Anglo American UK 33,919.70 151 Rio Tinto UK/Australia 33,168.40 167 Alcoa USA 30,010.70 202 RWE Germany 24,401.20 275 Vale do Rio Doce (CVRD) Brazil 18,241,50 278 Newmont USA 18,105,50 330 Alcan Canada 15,904.50 339 MMC Norilsk Nickel Russia 15,615.10 404 Lafarge France 13,161.40 450 Barrick Gold Canada 12,080.60
It is also worth mentioning those smaller mining companies, listed in London, that feature on the UK500/2004 list:
Xstrata with market capitalisation of £4,325 million (note the figure is in sterling)
Antofagasta - £2,049 million
Lonmin - £1,607 million
Vedanta - £913 million
Peter Hambro - £327 million
Highland Gold - £312 million
Randgold - £304 million
UK Coal - £186 million
Their total market capitalisation is £10,023 million.
While it seems noone has done precise figures on market capitalisation for all mining companies across the globe, the "Big Three" based in London and Australia (BHPBilliton, Anglo American, Rio Tinto) continue to have as much fiscal power as all the other sector companies assessed in the GlobalFT exercise - and that includes those not officially registered as miners.
Mining, oil and gas: some differences
If we exclude these technically "non mining" outfits (Alcoa, RWE, Alcan, Norilsk Nickel and Lafarge), then the Big Three undoubtedly have more financial - and acquisitonal - clout than the rest of the mining industry.
In contrast, the world's three biggest oil and gas companies, with around six hundred billion dollars of funds at their disposal, are considerably outpaced by the other operators which, taken in aggregate, can call on at least US$900 billion.
Four Russian oil companies are now to be found among the top 15 global oil and gas producers while, besides ExxonMobil, another seven US companies rank in the top 30.
This is not to diminish the importance of ExxonMobil, BP and Shell. But it does confirm that concentration of power, through M&M (mergers and acquisitions) within the mining sector has proceeded more rapidly and ruthlessly than with the oil majors. Also, the international "spread" of oil companies, as gauged by their country of incorporation, is considerably greater among the latter than the former.
There is also a summary on Mineweb of the latest research by PWC (PriceWaterhouseCoopers) the largest accountancy firm involved in mining. It succintly shows the degree to which the big mining companies have been boosted by the recent upsurge in demand, especially from China. However, it also warns that, if the demand isn't sustained (and there is recent evidence that it may not be) the companies could end up with a metals glut, and a new price fall.
Meanwhile the big investment houses - though encouraged to continue investing - are not convinced that returns on investmentare sufficiently high to justify a sea-change in their backing for the industry or new largescale projects.
[“London Calling” is published by Nostromo Research, London. The opinions expressed do not necessarily reflect those of any other individual, organisation or editors of the MAC web site. Reproduction is encouraged with full acknowledgment]