[miningmx.com] — GLOBAL resources giant BHP Billiton chairperson Jac Nasser said on Tuesday that while Europe, the US, Japan and other mature markets remain significant contributors to overall commodity demand, it is the emerging markets that are the key drivers of growth.
Speaking at the group’s annual general meeting in Australia, Nasser noted the last two years have seen almost unprecedented disruption in financial markets, with many countries still facing fragile economic conditions.
“This weakness in most developed countries has resulted in significant price volatility for our commodities. Our strategy helps counter that volatility and generates greater stability in our cash flows,” he said.
“We are witnessing an extraordinary structural shift and period of growth in the global economy towards China and other emerging markets and we are still only at the beginning of this era of growth and change.
“It is the forces of industrialisation, urbanisation and improved living standards in the developing world – particularly in China – that is driving this unprecedented growth.
“The building blocks of this growth, and improved living standards, are resources – the very products that are at the centre of our strategy – such as iron ore, coal, copper and energy,” he added.
He said the group’s products are the basic ingredients for everyday goods. These range from trucks, trains, consumer electronics, and household appliances – to construction equipment, building materials and the energy needed to keep the world powered, mobile and productive.
“We believe that our products, combined with our capacity to scale up to meet this unprecedented demand, positions BHP Billiton in a pivotal time and place in history.”
This year China overtook Japan as the second largest economy in the world at about $5 trillion. On the other hand, China’s population is about ten times that of Japan – which means that China’s income per person is just one tenth of Japan’s. With this background, there is no doubt that China will continue to have significant growth potential as its income per person and living standards continue to improve, he said.
At the same time there are a number of other economies that are at the initial stages of their development. For example, India’s economy is only one quarter the size of China’s, even though its population is about 90 per cent of China’s. Many analysts predict that India’s growth rate could be similar to that of China’s in the next few years.
“As a board, we feel confident that these factors will drive continued global economic growth and, importantly, long term demand for our diversified portfolio of products,” Nasser said.
CEO Marius Kloppers added that China has been remarkably successful in transitioning from a centrally planned economy into a more market-oriented one.
“Urbanisation and industrialisation are the key drivers that are transforming the lives of people in China, and they are also driving change in other emerging countries like Brazil, India and Russia. But these countries are not alone; we are also seeing the rise of yet another group of fast developing countries including Indonesia, Mexico and Turkey,” Kloppers added.
“The future success of BHP Billiton will depend on our ability to seize the opportunities that these changes present,” he said.
Kloppers added that presently, emerging economies are growing at approximately three times the rate of the developed countries and are becoming more important to the global economy. BHP Billiton’s growth is leveraged to these higher growth rates.
While Japan, the United States and the EU are finding it difficult to generate growth, overheating is actually a larger issue in the emerging economies. China has been successful in engineering a slowdown to prevent overheating and, in the same vein, both India and Brazil have raised interest rates, he noted.
Kloppers said that despite BHP’s overall modest outlook for the world economy, it is encouraged by the incremental demand for its products driven by these emerging economies.
