BHP Billiton has become more wary about the global outlook for commodities as Europe’s debt problems start to worry its big Chinese iron ore customers.
However, the global miner doesn’t think the situation is as bad as at the height of the global financial crisis three years ago.
Chief executive Marius Kloppers said on Thursday that businesses were cutting back on inventory and taking fewer risks as liquidity and trade financing dried up.
“In the last three to four months, our European customers have cut capacity and that’s had an impact on the iron ore market,” Mr Kloppers told reporters after the company’s annual general meeting in Melbourne on Thursday.
“I think the Italian (sovereign debt) issue and so on has unsettled even big Chinese customers.”
Earlier Mr Kloppers told shareholders that “the heightened volatility and uncertain economic outlook are expected to continue to weigh on sentiment in the markets for our commodities”.
BHP Billiton is the world’s biggest mining company and posted an Australian record $22.5 billion profit for the past financial year.
It is also the world’s biggest producer of coking coal.
The miner’s shares rose 39 cents, or 1.06 per cent, to close at $37.04 on Thursday.
Despite the more downbeat comments than just a month ago at the company’s London equivalent annual general meeting, BHP Billiton continues to raise funds and expand its mining operations worldwide.
This included Thursday’s $US3 billion bond raising, and an additional $US1.42 billion investment in its Western Australia iron ore operations.
Mr Kloppers also said that BHP Billiton was still able to conduct business in an orderly way and that the situation was not as bad as during the global financial crisis.
He said the company’s longer-term outlook had not changed, with industrialisation and urbanisation of the developing world being part of a structural shift in the global economy.
“The Chinese government has got many policy tools – almost infinite flexibility,” he said.
“We believe the Chinese government is going to continue to target eight per cent growth, at this stage we are very confidently standing by that.
“Against this backdrop, the future long-term demand for our products will remain strong.”
The shareholders’ meeting was dominated by a question and answer session lasting longer than three hours, with speakers – including indigenous people that had travelled from central Australia – angrily accusing the company of destroying the environment through uranium and coal mining.
The planned Olympic Dam mine expansion would make it arguably the biggest mine in the world, producing copper, gold and uranium.
The company points out that the expansion would only go ahead following exhaustive government approval processes.
“All of the energy sources have got issues, either carbon or radiation and so on, so the world will continue to make choices,” Mr Kloppers said.
