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Growth and evolution of commodities demand
Mike HenryPresident BHP Billiton Marketing4 May 2011
New York XiningShanghai
Disclaimer
Mike Henry, President BHP Billiton Marketing Slide 2
Reliance on Third Party InformationThe views expressed here contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton.
Forward Looking StatementsThis presentation includes forward-looking statements within the meaning of the U.S. Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of BHP Billiton. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. For more detail on those risks, you should refer to the sections of our annual report on Form 20-F for the year ended 30 June 2010 entitled “Risk factors”, “Forward looking statements” and “Operating and financial review and prospects” filed with the U.S. Securities and Exchange Commission.
No Offer of SecuritiesNothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP Billitonsecurities in any jurisdiction.
Non-GAAP Financial InformationBHP Billiton results are reported under International Financial Reporting Standards (IFRS). References to Underlying EBIT and EBITDA exclude any exceptional items. A reconciliation to statutory EBIT is contained within the profit announcement, available at our website www.bhpbilliton.com.
Agenda
Mike Henry, President BHP Billiton Marketing Slide 3
Beliefs behind commodity demand forecasts
Evolution of commodities demand
Well positioned for diversified, tier 1 growth
Concluding remarks
Above trend GDP growth forecast for the next decade despite softer OECD fundamentals
GDP growth has two main drivers Demographic factors including the
size and age profile of a population and degree of urbanisation Productivity factors including
education, infrastructure and the efficiency of capital allocation
China will become increasingly influential Despite the global financial crisis,
global growth rates improved in the last decade Decelerating Chinese growth rates
are expected to be offset by the larger size of the Chinese economy
Mike Henry, President BHP Billiton Marketing Slide 4
Global GDP growth rate (% per annum)
Source: 1900 to1980 – J. Bradford De Long (“Estimates of World GDP”, 1998); 1980 to 2010 – IMF World Economic Outlook Database; 2010 to 2025 Forecast – Global Insight.
0
1
2
3
4
5
6
1900-1920
1920-1930
1930-1940
1940-1950
1950-1960
1960-1970
1970-1980
1980-1990
1990-2000
2000-2010
2010-2020
2020-2025
Developed economies
Developing economies
0
10
20
30
40
50
60
0
2,000
4,000
6,000
8,000
10,000
12,000
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Investment expenditure
Share of total GDP
The positive global outlook doesn’t rely upon aggressive underlying assumptions for China…
Mike Henry, President BHP Billiton Marketing Slide 5
Urbanisation rates In the first half of this decade 20 million
people per year will move into cities However, the rate of urbanisation
will slow
Construction The rate of growth in construction will
decelerate in the next decade By 2025 the rate of addition of new
urban floor space will fall by half
Infrastructure New city clusters will develop requiring
new transportation and energy infrastructure Development of the Western Provinces
will be resource intensive
CAGR10%
CAGR13%
Source: Global Insight.
Investment expenditure(RMB billion, real)
Share of total GDP(%, nominal)
0
10
20
30
40
50
60
70
80
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Consumption expenditure
Share of total GDP
…nor unrealistic assumptions for Chinese consumption growth
Consumption has grown at a rapid rate Consumption has been growing rapidly
although less than overall GDP growth Incomes will be driven by labour
productivity Rising incomes will support
consumption of goods and services
With the transition in the economy, GDP targets can be met with slowing investment In the last decade, investment growth
(~12%) has outpaced consumption growth (~8%) with resultant overall GDP growth of ~10%
Consumption expenditure(RMB billion, real)
CAGR8%
CAGR10%
Mike Henry, President BHP Billiton Marketing Slide 6
Source: Global Insight.
Share of total GDP(%, nominal)
China has and will continue to enact policy to deliver a sustainable growth model
Policy is focused on sustainability Income and wealth distribution to place higher
priority on individuals Increasing domestic demand focus
Policy to further support consumption Improvements in welfare, education and health
reducing the need for precautionary savings Provision of 36 million new social housing units Shift in tax structures to promote consumption
The economic mix and structure will shift New development will take place in the west
and the interior of China More funding will be placed into research and
development, and into higher value industries
Mike Henry, President BHP Billiton Marketing Slide 7
Great Hall of the People, Beijing
Importantly, China has a track record of delivering
0
6
12
18
1986 1992 1998 2004 2010
5YP target
YoY growth
5 year average YoY growth
GDP growth target versus actual growth (%)
70
75
80
85
90
95
100
105
110
0
20
40
60
80
100
120
140
160
180
2005 2006 2007 2008 2009 2010
GDPEnergy consumptionEnergy efficiency (RHS)Efficiency target (RHS)
GDP growth versus energy consumption Index (2005 = 100)
Source: China National Bureau of Statistics.
Mike Henry, President BHP Billiton Marketing Slide 8
China
India
US
Eurozone
Japan
South Korea
Australia
Brazil
Canada
Chile Russia
South Africa
India 2030
China 2030
US 1980 Japan
1980
0
10
20
30
40
50
0 200 400 600 800 1,000 1,200 1,400 1,600
Source: Global Insight; BHP Billiton analysis.1. All figures for 2009 unless mentioned otherwise.
Bubble size = GDP of US$5 trillion (real 2005 PPP)
Chinese GDP is set to grow substantially to 2030
Mike Henry, President BHP Billiton Marketing Slide 9
World GDP per capita1
(US$’000, real 2005 PPP)
Population(million persons)
0
10
20
30
40
50
60
0 100 200 300 400
Demographics still vary significantly across China
Mike Henry, President BHP Billiton Marketing Slide 10
US
Eurozone
US 1980
Brazil
Russia
Japan
Japan 1980
Canada
Australia
South Korea
ChileSouth Africa
California
Bubble size = GDP of US$2 trillion (real 2005 PPP)
China Eastern Provinces
China Provinces (excluding Eastern)
US States
Source: Global Insight; BHP Billiton analysis.1. All figures for 2009 unless mentioned otherwise.
World GDP per capita1
(US$’000, real 2005 PPP)
Population(million persons)
Slowing growth in China simply reflects the natural progression of the economy
Mike Henry, President BHP Billiton Marketing Slide 11
Source: Global Insight; IMF; Morgan Markets; OECD.
Chinese GDP growth(%)
0%
2%
4%
6%
8%
10%
12%
14%
16%
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
Actual GDP growth
Global Insight
Consensus
IMF
Morgan Markets
OECD
Consensus L/T
Agenda
Mike Henry, President BHP Billiton Marketing Slide 12
Beliefs behind commodity demand forecasts
Evolution of commodities demand
Well positioned for diversified, tier 1 growth
Concluding remarks
Source: CISA; worldsteel; Global Insight; JBS; BHP Billiton analysis. 1. Steel consumption on a crude steel equivalent basis.
Economic development is characterised by strong, early phase steel demand growth
Mike Henry, President BHP Billiton Marketing Slide 13
Industrial development & steel consumption1
(kg per capita)
0
200
400
600
800
1,000
1,200
0 5 10 15 20 25 30 35 40 45 50
India today
Japan
USA
Germany
South Korea
China today
GDP per capita (US$’000, real 2005 PPP)
China/India intensity
Other country intensities
Possible path range for China by 2025
0
5
10
15
20
25
30
35
0 5 10 15 20 25 30 35 40 45 50
Source: World Bank (GDP and population); Brook Hunt; CRU; IISI; Global Insight; BHP Billiton analysis.
Copper demand intensity follows a similar path, with a longer plateau
Mike Henry, President BHP Billiton Marketing Slide 14
India today
Japan
USA
Germany
South Korea
Semis copper consumption(kg per capita)
China today
GDP per capita (US$’000, real 2005 PPP)
China/India intensity
Other country intensities
Possible path range for China by 2025
0
2
4
6
8
10
12
14
0 5 10 15 20 25 30 35 40 45 50
Japan
USA
Germany
South Korea
China today
India today
Source: Global Insight; IEA; BHP Billiton analysis.
Electricity consumption continues to grow as economies mature
Electricity consumption (MWh per capita)
China/India intensity
Other country intensities
Possible path range for China by 2025
Slide 15Mike Henry, President BHP Billiton Marketing
GDP per capita (US$’000, real 2005 PPP)
40
60
80
100
120
140
160
180
0 5 10 15 20 25 30 35 40 45 50
Commodity intensity trends evolve with economic development
USA(Intensity index)
Source: World Bank; Brook Hunt; CRU; IISI; Global Insight; CISA; worldsteel; JBS; IEA; BHP Billiton analysis.
Slide 16Mike Henry, President BHP Billiton Marketing
GDP per capita (US$’000, real 2005 PPP)
Electricity
Steel
Copper
Emerging economies
Developed economies
Global commodity demand well supported by emerging market growth
Global commodity demand forecasts Index (CY10 = 100)
Slide 17Mike Henry, President BHP Billiton Marketing
0
60
120
180
2000 2010 2025
China India Rest of the world
0
60
120
180
2000 2010 20250
60
120
180
2000 2010 2025
Copper Seaborne thermal coalFinished steel
1.7 x1.5 x
1.7 x
Source: Brook Hunt; IEA; CRU; BHP Billiton analysis.
Agenda
Mike Henry, President BHP Billiton Marketing Slide 18
Beliefs behind commodity demand forecasts
Evolution of commodities demand
Well positioned for diversified, tier 1 growth
Concluding remarks
BHP Billiton is well positioned for early and late stage economic development
Mike Henry, President BHP Billiton Marketing Slide 19
1. Excludes third party trading.
Underlying EBIT margin1
(H1 FY11, %)
37%
36%
62%
19%
33%
52%
1%
14%
59%
Metallurgical Coal
Manganese
Iron Ore
SSM
D&SP
Base Metals
Aluminium
Energy Coal
Petroleum
Underlying EBIT(H1 FY11, US$ billion)
Ferrous(51.2%)
Non Ferrous(27.8%)
Energy(21.0%)
Energy Coal
Manganese
Petroleum
D&SPSSM
Metallurgical Coal
Base Metals
Iron Ore
Aluminium
0
5
10
15
0
10
20
30
40
50
60
70
80
90
Future options Pre-feasibility Feasibility Execution Other growth capex
Total spend FY11 to FY15
Commodity split
Significant investment underpins our tier 1 growth strategy
Mike Henry, President BHP Billiton Marketing Slide 20
Metallurgical Coal
Iron Ore
Potash
Copper
Other
Petroleum
Strong pipeline of investment(US$ billion)
Note: Excluding sustaining capital and exploration expenditure and future investment associated with the acquisition of the Fayetteville Shale.
Energy
Non-ferrous
Ferrous
Agenda
Mike Henry, President BHP Billiton Marketing Slide 21
Beliefs behind commodity demand forecasts
Evolution of commodities demand
Well positioned for diversified, tier 1 growth
Concluding remarks
Concluding remarks
Strong global GDP growth to continue
Increasing impact of emerging economies on global growth
China growth assumptions are realistic
Relative commodity demand intensities to evolve over time
BHP Billiton is well positioned to meet the growth opportunity as well as the evolution in demand intensities
Mike Henry, President BHP Billiton Marketing Slide 22