Finding good news in the commodities sector has been more than just difficult of late. So, how about news that is simply less bad? BHP Billiton Ltd. (NYSE: BHP) was raised to Outperform from Neutral by Credit Suisse on Tuesday. The firm’s European Metals & Mining analyst is Liam Fitzpatrick, and this call is somewhat based on valuation and somewhat on upcoming action expected by the company. Credit Suisse revised estimates and target prices lower. Again, it is less bad rather than outstanding news.

Fitzpatrick’s take is that greater supply-side action is needed by BHP Billiton. With the global mining sector reaching multi-decade lows across a range of performance and valuation metrics, Credit Suisse predicts another year of weak Chinese demand in 2016.

The firm also believes that supply curtailments are likely to remain too little too late, particularly in bulks. A ceiling on the U.S. dollar and floor on oil prices will be critical in putting a floor on prices, but Credit Suisse’s strategists expect ongoing, albeit slower, appreciation of the U.S. dollar in 2016. The potential for Chinese depreciation is a further macro threat in 2016.

On the less bad news that is still bad, Credit Suisse did cut commodity and earnings estimates. Fitzpatrick’s note said:

We retain our preference for base metals over bulks (iron ore and coal), although even in base metals further production curtailments may still be required to firmly push markets back into balance. In bulks the threat has moved increasingly from supply to demand, and we expect another year of negative steel demand growth from China in 2016.

Credit Suisse is now modeling a 50% cut in the progressive dividend to a more sustainable level, but the firm sees this still leaving BHP Billiton with an attractive 5.5% dividend yield. Shares have dropped over 30%, so the firm sees BHP’s valuation being at more than a 15% discount to Rio Tinto. While the Samarco situation will take years before the final cost and outcome is known, Fitzpatrick thinks the shares have more than priced in a worst case scenario.

Credit Suisse’s call was from the London office, and BHP trades in London with a prior close of 669.30p — and the firm’s 900.00p target would imply upside of almost 35%, without consideration of the dividend.

BHP Billiton’s American depositary shares were last seen up 1.3% at $23.97 in New York trading. Its consensus analyst price target is still closer to $39.50, and its 52-week trading range is $23.21 to $52.98.

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