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BHP bearish on iron ore, coal tags as China growth slows

Keywords: Tags  BHP Billiton, iron ore, metallurgical coal, China, Marius Kloppers


SHANGHAI — BHP Billiton Plc is bearish on iron ore and coal prices in the short and long term as a result of China’s moderating growth and the country’s transition to a more consumption-led economy.

China’s destocking and lower steel demand from Europe, India and the Middle East have led to sharp price drops for iron ore and metallurgical coal, the diversified miner said.

"We do not anticipate any material pricing upside in the near term" as subsequent restocking has largely been completed, BHP chief executive officer Marius Kloppers said at the company’s annual general meeting in Sydney.

The company is expecting China’s gross domestic product growth to be in a range of 7 to 8 percent in coming years, "lower than the double-digit growth rates seen over the past decade" that had been based on industrialization and urbanization.

"China’s future needs will change, and focus will gradually switch towards great mechanization to drive productivity growth and to the next level of consumer goods," BHP said. The transition will "naturally result in an eventual moderation of demand for commodities such as iron ore and coal."

The miner noted that China’s transition also will lead to increased demand for copper, energy products and potash fertilizer, which it is well positioned to meet. BHP’s diversification strategy reduces its exposure and enables it to benefit throughout the commodity cycle, it said.

BHP expects overall commodity demand to increase by 50 to 80 percent in the next 15 years, Kloppers said.

To remain cost-competitive in the face of the current economic environment, BHP has carried out spending cuts by slowing down some development projects and shutting down several high-cost operations, and will continue to do so.

A version of this article was first published by AMM sister publication Steel First.


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