【路透社】BHP doubts China ore binge to last

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BHP doubts China ore binge to last
http://business.watoday.com.au/business/bhp-doubts-china-ore-binge-to-last-20090527-bmsb.html

May 27, 2009 - 10:03AM

The head of BHP Billiton, the world's top miner, voiced doubts about the durability of recent strong Chinese demand for commodities and said the picture for global demand was unclear.

Signs of a strong pick-up in Chinese demand for industrial raw materials have fuelled a rally in commodity prices, with three-month copper surging more than 50 per cent so far this year.

But BHP Chief Executive Marius Kloppers, in giving a cautious market outlook in a speech to a mining conference, pointed out that average commodity prices were still about 50 per cent below their peaks, though he later declined to comment to reporters on recently renegotiated iron ore prices.

BHP shares were up 1.4 per cent at $34.78 in a broader market up 1.18 per cent. Rio Tinto was unchanged at $65.46.

On Tuesday, rival global miner Rio Tinto and Japanese steel mills agreed to cut key iron ore prices by a third in this year's first contract deal, setting a benchmark that China's embattled mills will almost certainly resist.

In a separate report today, Reuters reported that South Korea's biggest steel maker, POSCO, will agree on a 33 per cent cut in contract iron ore prices to follow the benchmark deal reached between Nippon Steel and Rio Tinto.

The long overdue settlement for contracts starting from April was in line with levels rumoured last week but some analysts have speculated the decades-old benchmark-setting system may not hold this year, as China has strongly demanded a deeper cut of around 45 per cent.

"The deal between POSCO and Rio Tinto may come as early as today," one of the source told Reuters.

Record imports

China reported record imports of iron ore for April, another sign for commodity-market bulls that the wider rally has firm foundations, but BHP's Mr Kloppers said the global demand picture was still unclear and should take around six months to resolve.

He said China's current build-up of stocks did not entirely reflect underlying demand and was tied to China's massive 4 trillion yuan ($750 billion) economic stimulus package announced late last year.

"We have some residual concern in the very short term that there may have been some over-buying in anticipation of the stimulus package, which may have led to some stock-build ahead of real demand," Mr Kloppers told the conference.

He said the picture was further muddied by uncertainty over when members of the Organisation for Economic Cooperation and Development (OECD), the global club of rich nations, would start re-stocking after running down inventories as demand collapsed.

"We do see stabilisation in the next six months as the OECD finds its base level and re-stocking commences, and as China's re-stocking exercise evens out," Kloppers said.

"Importantly, in the medium term we don't expect a sharp rebound in overall economic activity; in fact, we probably believe that economic recovery will be both slow and protracted."

Reuters

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