BHP Billiton chief executive Marius Kloppers says the European debt crisis could dry up trade finance, the lifeblood of world commerce.
Mr Kloppers said there had recently been a “fairly large change” in the way banks operated, which BHP Billiton had predicted publicly.
This particularly applied to European banks, which had historically been the major providers of trade finance, Mr Kloppers told a teleconference on Monday.
“We really started seeing the European conditions impacting, for example, trade finance, availability of LCs (letters of credit) and so on,” Mr Kloppers told reporters. “We expect that we’ll continue to see an impact.”
Responding to a query on whether BHP Billiton was prepared for a potential break-up of the eurozone, Mr Kloppers said the main effect of such a move would be on global dynamics and growth, and credit flow around the world.
BHP Billiton was not exposed to the Euro, with all of its accounts and sales in US dollars.
“All of our trade exposures are US dollars denominated, our bank loans are US dollar denominated, our bonds are being swapped to US dollars.
“So from all of those perspectives, we don’t see any real impact,” Mr Kloppers said.
“And we don’t have any operations that have Euro exposure in terms of operating costs.”
Mr Kloppers said the company did not expect iron ore demand from Chinese steel mills would change substantially in the short term after recent fluctuations.
The steel industry was operating at rates lower than historical highs, which had been reflected in the iron ore price.
“When we talk to our Chinese customers, there is not a sentiment that the operating rate of the steel industry will improve or change dramatically over the next little while,” Mr Kloppers said.
“We are likely to see around the current steel production rates to continue for a little, which is clearly below what we’ve seen at other points in time.”
On the broader seaborne iron ore trade, Mr Kloppers said that was harder to predict.
“We have had very low iron ore port stocks over the last couple of months – there’s been a little bit of a replenishment of that.
“The big variable for us is to see how domestic Chinese iron ore production responds in the face of the price changes that we’ve had.”
BHP Billiton on Monday announced that it had promoted the president of its Vancouver-based diamonds and speciality products division, Graham Kerr, as chief financial officer.
Mr Kerr replaces Brazilian Alex Vanselow, who has resigned to pursue personal business interests.
BHP Billiton’s Singapore-based marketing president, Mike Henry, will join an enlarged group management committee as group executive and chief marketing officer, reporting to Mr Kloppers.
