BHP Billiton sees no sign of easing commodities price pressure; Positive on demand growth

Mining major BHP Billiton does not see any immediate uptick in commodity prices, especially in iron ore. The company’s CEO Andrew Mackenzie said he is bearish on the price front but upbeat on demand growth in view of the latent demand from rising Asian economies.

“The first thing I would say is we're relatively bearish about the long term projections for prices,” Chief Executive Andrew Mackenzie said in Melbourne.

The CEO noted that in the current scenario of low commodity prices, the only way to compete effectively is to keep the costs down, reports Reuters. “That is the spirit of competition that we play in,” he said.

Bright demand

Sounding bullish on the demand side the BHP boss said he is extremely optimistic. “But, yes, I am optimistic about the long term growth in demand, because I know the kind of resources it requires to push three, four billion people into the middle classes, particularly in Asia, and the kind of consumption that will come from that,” Mackenzie added.

Iron ore prices have been tumbling after world’s top steel producer China started slowing. Mackenzie also expressed skepticism over the forecasts made by some Chinese steel makers that production would stabilise around 600 million tonnes. He said BHP and the other big -producers of iron ore are expecting that Chinese steel production would peak around 1 billion tonnes in the next 10 years.

“I think China will be producing a lot more steel than the 600 million tonnes a year that you're talking about, and some for a while," he told reporters after a speech in the University of Melbourne.

“If China really wants to get along a path towards full development, it does have to get on with further construction of a number of things, including machinery and cars, and that will require more steel to be produced,” Mackenzie said.

Western Australia’s exports hit

Meanwhile, Western Australia, the hub of commodity exports has projected a subdued economic growth for 2016, as the state’s export earnings are under pressure from plunging commodity prices.

In the latest Economic Brief by the Western Australian Chamber of Minerals and Energy (CME), prepared in conjunction with Deloitte, it gave a forecast of marginal growth for the state’s economy at 2.4 percent in the 2015/16 fiscal. But better growth is expected at 3.9 percent in 2016/17, reports Mining Weekly.

The CME said on Friday that weak prices are hammering down Western Australia’s export earnings. The earnings from resources exports are down by 23 percent on a year on year basis.

The gains from the export earnings in copper ores were not adequate to offset the loss in earnings from other commodities, such as natural gas and nickel ores, the report noted.

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