BHP Billiton puts its money on the iron ore market and China

Kloppers does not have to look over his shoulder, his job looks secure for now

BHP Billiton Ltd. (NYSE:BHP) is betting on the iron ore market as one of the forces to drive the mining industry in the next decade, especially as developing nations such as China move from investment-led economic growth to consumption-led economic growth.

In a presentation given to an audience at the Bank of America Merrill Lynch Global Metals, Mining and Steel Conference in the U.S. this morning, BHP’s CEO Marius Kloppers said there is a “window of opportunity” for iron miners.

China, the world’s largest steel producer and consumer, is expected to increase crude steel production to 1.1 billion metric tons a year by 2025 which would equate to a 650 million ton a year increase in global seaborne iron ore demand, Kloppers said.

“The outlook provides a major opportunity for BHP Billiton and our competitors,” he said, stressing the company’s projects would be approved “in a sequence that maximizes value, reduces risk and balances short- and long-term returns.”

BHP, the world’s largest mining company by market value, is well placed to achieve a stepped-up production through its West Australian Iron Ore Expansion project in the Pilbara and was in the process of increasing its seaborne capacity through the Port Hedland outer harbour project, currently at feasibility stage.

Talking about copper, Kloppers said that the reduction in copper ore grades in the last 100 years, after stability in the last two decades of the previous century, would constrain the mine supply response to increasing demand, which was forecast to grow to near 30 million tonnes per annum in 2025 from 15 million tonnes in 2000.

BHP Billiton is currently working on 22 projects.

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