A year ago this Saturday, November 8, BHP Billiton went public with its ambition to bid for rival Rio Tinto. It proposed an offer of three of its shares for every one Rio share, a ratio that was boosted to 3.4 when the bid went formal in February after BHP was forced to make a proper offer by the regulators in London, not in Australia.

A lot has happened since then. The deal is worth less now than it was a year ago because of the significant change in the outlook for commodities as the global economy sinks, especially those in Asia where this bid is really tied into.

On November 2, 2007, BHP shares were trading around $45 each and Rio Tinto shares were at $110.96. yesterday the closed up 8.5% to $31.60 for BHP and Rio shares rose 8.6% to $86.60. They and other miners were boosted by a solid rebound in commodity prices Tuesday night. That vanished yesterday in the wake of the US election result, so the shares will slump today.

The third quarter results for the world’s biggest steel group, ArcelorMittal, overnight have told us more about the outlook for the biggest and most important sector for BHP and Rio than they have so far conveyed to the market here.

Both BHP and Rio admit China is slowing, as is the market globally for commodities, but that’s about all. BHP has said to news outlets that it’s still steaming ahead, Rio has hinted at reviews of projects and output levels and delays to asset sales, but is also steaming ahead.

But unless they have a couple of secret customers no one knows about, something will give in the steel industry, and quite soon.

ArcelorMittal, which buys more steel making materials than anyone else, so the market should listen when it reveals that third quarter steel output has slumped; its output this quarter will be slashed as it cuts production by 30%-35% and more at some steel plants. Its earnings will more than halve on what they were in the December quarter of 2007.

The production is double the 15% the company warned of last month. It has already idled plants in Europe and in Asia: it has revealed a cut of 30% at a huge, 6 million tonnes a year plant in Kazakhstan.

But it’s not just steel and iron ore which are weak: copper,  coal, nickel, and a host of other metals have fallen from record peaks. The collapse in the oil price from more than $US147 a barrel in July to around $US69 a barrel has been spectacular. Copper has fallen from over $US4 a pound to less than $US2 a pound in the past six months. Spot iron ore prices are around $US60 a tonne half the contracted figure of around $US120 a tonne, depending on quality and shipping terms.

The news of the ArcelorMittal cutbacks comes less than a week after the world’s largest iron ore group, Vale of Brazil, revealed plans to cut production by 10%, or around 30 million tonnes immediately.

Vale blamed a 20% drop in steel production in Europe, the US and Asia, where Arcelor is a major player.

The news will raise further questions about the lack of any production guidance from BHP Billiton and Rio Tinto

Arcelor’s cuts come despite reporting a 29% rise in net earnings for the third quarter to $US3.8 billion for the three months ended September 30, compared with earnings for the third quarter of 2007 of $US3 billion.

The company is cutting its eight-year, $US35 billion expansion plan by chopping capex next year in half to around $US4.5 billion. Capital investment this year will be about $US5.5 billion, down from a forecast $US7 billion.

The company says that in the past month, large steel users in sectors such as construction, vehicles and engineering have slashed their orders, causing steel prices to fall. Reflecting this new environment, ArcelorMittal’s shipments in the fourth quarter are expected to be about 18.5 million tonnes, down sharply from the 25.6 million tonnes in the third quarter.

“The current period of de-stocking requires that we make appropriate production cuts to seek to rebalance supply and demand and we are also accelerating efforts to pay down debt,” Mr Mittal said in a statement accompanying the report, which was posted on its website.

But the steel giant slashed its earnings’ outlook for the fourth quarter this year due to increased production cuts. The company said fourth quarter EBITDA “guidance to be in the range of $2.5 – $3. 0 billion,” more than 60% less than the figure for the third quarter. That will be less than the actual EBITDA for the 4th quarter of 2007 of $US4.8 billion.

BHP and Rio’s current half year earnings won’t be pretty, Isn’t it time for the regulators to ask both companies for more information and an update: they are so important to the health of the market.