The world’s number one mining company BHP Billiton (LON:BHP) is shifting its investment strategy away from products like iron ore and coal in high demand during China’s infrastructure and industrial boom towards more consumer-oriented commodities.
Comments by CEO Andrew Mackenzie are in line with Beijing’s stated goals of changing the world’s second largest economy from investment-driven to consumer-led growth and opening up all sectors to market forces.
Mackenzie told reporters in Beijing on Thursday he expects rising Chinese demand for materials with more consumer uses, such as copper, while greater food consumption could lead to more demand for the soil nutrient potash.
“We see a Chinese economy gradually shifting from construction to consumption, and so, we will transition,” said Mackenzie adding that “We imagine we will continue to creep our exports of steelmaking materials like metallurgical coal and iron ore, but we’re much more likely to make major investments in what we feel are the next phase of China’s growth in energy and in food.”
Mackenzie said making acquisitions is not on the radar for the $174 billion company and it may look at selling more of its units to “simplify its portfolio”.
Mackenzie acknowledged the Melbourne-based firm’s expansion of its iron ore business “was too rapid and that it did not focus as much as it should have done on the underlying expansion of the overall business.”
While not as aggressive as top iron ore miners Vale and Rio Tinto in adding output, BHP is on track to up production at its newest iron ore mine Jimblebar to 55 million towards its longer term target of 270 million tonnes per annum.
Despite the shift of focus, iron ore is far from being a drag on the bussines and Mackenzie expects China’s steel production could rise to 1.1 billion tonnes over the next decade: “China’s urbanization has a long way to run.”
The price of iron ore is down more than 30% in 2014, copper 8% and potash is trading 25% below last year’s levels.
3 Comments
Mark
Potash is already in a giant glut. The industry leader, PotashCorp, hasn’t even been running its mines at anywhere near capacity for the past few years. BHP’s management is delusional if they think that this is where the profit is going to be made in the future. Their Jansen project will collapse the price even further and produce a negative return on capital.
Another Guest
Google “The Truth Contest” and read what is said in “The Present” to make this world a paradise for all.
frankinca
Steel and copper are going to be in demand for years while China and other Asian countries build up the energy transformation and transportation infrastructure. And the new need for water as well as energy transportation, all require basic metals to do the work. NO INTERNETTING THE WATER SUPPLY, ONLY INFORMATION IS THAT what is needed which the internet takes care of. Things ARE important and virtual is just a pipe dream for those who are not practical and live in their heads or their phone. The US version of opium, that the British got the Chinese hooked on, and will be one of their downfall items when they want to trade with them.