BHP warns Australian mining not ready for low-cost competitors
The boom in demand from China’s industrialization is now “past the period of aggressive growth,” BHP’s Australia President said.
Chinese miners will be hunting for fresh deals and acquisitions this year, as they try to feed the country’s voracious appetite for iron ore and precious and industrial metals key in an economy that has slowed, but is still expanding at a healthy pace.
The Australian reports that Asian investors have no shortage of cash. China’s populace has built up US$7 trillion in savings that could start making its way to mines and other hard assets.
Only last year Chinese overseas investment totalled $61.6 billion by the end of September, which according to data posted by the country’s Ministry of Commerce represented a 17.4% year-on-year increase. For 2014, authorities expect overseas investment to continue growing at double-digit rates.
But while Chinese have traditionally targeted energy and mining firms, experts such as HSBC claim they are beginning to see evidence of a shift away from these sectors towards renewable energy, social infrastructure, sustainable business and biotechnology.
Despite the novel trend, industry data shows China accounted for nearly 14% of all mining merger and acquisition activity by value last year. The number of transactions, however, fell to 21 from 34 with a total value drop of $1 billion, from $6 billion in 2012
According to PwC’s latest global mining deals outlook, Beijing’s share of global mining deals is set to grow this year, as in 2013 —the worst for global mining mergers and acquisitions in nearly a decade— China still managed to outpace nations such as Canada, Australia and the United States.
However Ken Su, the China mining and metals leader at PwC, warns the average deal size of investments in overseas mines would be smaller, as more private Chinese companies, which lack the financial muscle of state-owned enterprises, continue to venture abroad.
