Markets: Mackenzie at the mic

Andrew Mackenzie, BHP Billiton’s chief executive, came to the Asia Society in Melbourne and made his pitch to investors they keep the faith.

“The percentage growth rate for some commodities may be slowing (but) absolute demand levels are still rising off a larger base,” says Mackenzie.

Global demand for commodities will increase 75 per cent over the next 15 years as 250 million people shift from the Chinese countryside to cities, he says. Asia’s middle class will number three billion. Steel consumption, the BHP Billiton chief forecasts, will increase more than 50 per cent over the next decade with more than half of such an increase absorbed by Asia.  

Australia, according to the chief executive, provides 40 per cent of China’s iron ore, 40 per cent of South Korea and India’s coal and nearly a fifth of Japan’s LNG.

But BHP Billiton and other Australian miners that operate internationally have to compete hard against Chinese low cost metallurgical coal producers, Mackenzie says. The US is an increasingly competitive supplier of thermal coal. The US, Canada and Africa will compete hard to sell liquid natural gas to Asia.

To cope with this competition, Mackenzie says he is focused on productivity at the company.

He says BHP Billiton has cut costs and improved the utilisation of equipment to the point where times to fill a truck full of a commodity has been halved. Safety rates are improving.

“All of us must now move quickly from words to action so that all our nation’s strengths are directed towards urgent and ground breaking pro productivity reforms,” says Mackenzie.

At 1354 BHP Billiton shares were down 63 cents, or 1.8 per cent, to $34.99. The stock has gained 12 per cent in 12 months.

Mackenzie refused to answer reporters’ questions on capital expenditure. He declined to discuss the potential prices for iron ore or where the Australian dollar may trade in relation to the US currency. Mackenzie says he may answer such questions when BHP Billiton announces its earnings later this month.