October 20, 2011
BHP Billiton continues to insist that the financial and market turmoil in Europe and the US will have little effect on China's long-term demand for its output, despite short-term uncertainty.
But it warned that while its order book remains full, customers are taking a cautious approach to inventory levels because of fears of further uncertainty.
Fronting the company's London annual general meeting tonight, chairman Jac Nasser said the company's plans to complete spending $US80 billion ($78bn) on growth projects in the five years to 2015 had not wavered.
"In the short term, high levels of sovereign debt in the eurozone and, to a lesser extent in the US, will continue to create uncertainty," Mr Nasser said, adding that the company still believed these regions would have a slow recovery from the financial crisis.
But turning to China, Mr Nasser said the Asian giant's continued hunger for resources was a structural shift, not something temporary.
"Unlike a gold rush, this structural shift will not suddenly disappear, rather it will continue to drive long-term demand for minerals and energy," he said.
Chief executive Marius Kloppers highlighted the other side of the price equation, supply, which big miners are concentrating on as they try to assure investors the long-term outlook is healthy.
"Many players scaled back on investment during the global financial crisis and, as a result, production of key commodities like iron ore, metallurgical coal and copper have fallen materially short of forecasts made only three years ago," Mr Kloppers said.
On top of this, unexpected events like the Queensland floods and the Japanese tsunami had hit supply, while shortages of mining trucks and tyres were also slowing mine expansions, he said.
Mr Kloppers said BHP's order book remained full and that the developing world's industrial operating rates were healthy.
"We have, however, seen a softening of prices over the last months as customers behave conservatively in the light of global uncertainty," he said.
"We are also seeing that customers are looking closely at their inventory levels as they operate their businesses, cognisant of the potential need to tailor their plans if the global economic uncertainty continues."
Still, the base-case global economic outlook remained one where growth was only modestly below potential, supported by China, India and other developing economies, Mr Kloppers said.
"Provided that there are no large external shocks ... we expect these economies that drive our products to grow solidly."
Article by Matt Chambers From:The Australian