BHP admits mistakes in its China, iron ore strategy

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.