BHP 1.32% $36.00 bhp group limited

more bad news for bhp

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    AUSTRALIA'S biggest investment bank has slashed next year's forecasts for coal, iron ore and base metals, adding to fears the resources boom is collapsing rather than softening.
    And economists warn the predicted price falls, if borne out, would have dire consequences for local miners - and the national economy.

    In a bleak assessment suggesting the world is in for a much deeper and longer recession than previously thought, Macquarie Bank analysts led by Jim Lennon said in a report yesterday that prices for coal - Australia's biggest commodity export - would fall by as much as 60 per cent in 2009.

    Mr Lennon also lowered his price forecasts for iron ore by 20 per cent and base metals by as much as 40 per cent from previous guidance.

    "We are more pessimistic than we were a month ago and so are the numbers, especially for coal," he said.

    In what marks the biggest departure in opinion when compared with most of his colleagues, Mr Lennon foresaw no recovery for years to come.

    Prices for all commodities would remain at depressed levels or post further substantial falls in the years to 2012, he said.

    While a growing number of investment banks are lowering their outlook for the commodities sector next year, most are tipping a tentative recovery towards the end of next year or early 2010.

    CommSec equities analyst Savanth Sebastian said the outlook was overly bearish but added that Australia would have "big concerns" if the forecasts were accurate.

    "If it was the case, you'd see a lot of marginal mining projects go under and as a result you'd see a lot of processing plants close up shop," he said.

    "Unemployment will rise - maybe as high as 10 per cent - spending will be cut back, property prices will fall, wealth levels will fall.

    "It suggests that overall things will be very grim and very dire."

    Macquarie Bank's dreary outlook follows a shock about-face in commodities markets this year, with an unprecedented bull run pushing prices to record levels in July and then a massive sell-off wiping 50 per cent from their value.

    And it follows a steady stream of negative news from the resources sector, with BHP Billiton chief commercial officer Alberto Calderon admitting in a newspaper report on the weekend that the miner would lose up to six million tonnes of iron ore sales this year as steel mills deferred shipments due to the credit crisis.
 
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