UPDATE: BHP Iron Ore CEO Cautious On China Near-Term Demand
August 04 2009 - 11:50PM
Dow Jones News
BHP Billiton Ltd. (BHP) iron ore chief executive Ian Ashby said
Wednesday the iron ore industry had "every reason" to be optimistic
but retained a cautious stance on the outlook for fundamental,
underlying demand in China, the world's largest iron ore
consumer.
"We are cautious on China after going through an enormous trough
in 2008 when stocks were drawn down. We think restocking has come
to an end but we still don't know what the fundamental demand is.
We think we'll find out in the second half of the year," Ashby told
reporters at the Diggers and Dealers forum.
China has increased its share of seaborne imports after many
domestic, smaller mines shut down due to a slump in prices and
plummeting freight rates as well as tighter safety standards made
imports more competitive.
Imports have swelled to record levels this year, with China
importing 279.2 million metric tons of ore in the six months to
June 30, up 29% on the same period a year earlier, according to
preliminary data from China's General Administration of
Customs.
Asked if BHP's business relations with China had changed in
light of the arrest of four Rio Tinto PLC (RTP) iron ore executives
on suspicion of stealing state secrets, Ashby said: "It is business
as usual for us in China. Nothing has changed. There are no changes
to our shipping schedule."
Beyond China, long-term fundamentals for the market were solid,
based on "one-third of the global population modernizing," said
Ashby.
"The world is short iron ore units, and supply hasn't been able
to respond as quickly as we would like," he added.
While the short-term market was still impacted by restocking and
destocking cycles, BHP's iron ore operations are producing at
capacity, he added.
BHP's proposed multibillion iron ore joint venture with Rio
Tinto in Australia's Pilbara region was making good progress, and
the deal was in the process of moving from a non-binding agreement
to a binding contract.
The deal, which BHP believes will reap US$10 billion in
synergies, is on track to conclude in mid-2010.
However, clearance by the European Commission competition agency
remains a potential stumbling block. Commission concerns over the
proposed BHP takeover of Rio Tinto were material in contributing to
the breakdown of the merger proposal last year.
"We have engaged the European Commission. We don't know if it
(the iron ore JV) will be subject to merger clearance. We're not
sure at this stage," said Ashby.
-By Elisabeth Behrmann, Dow Jones Newswires;
612-8272-4689, elisabeth.behrmann@dowjones.com