The big mining houses have the capacity to meet the world’s rising demand for fuels and ores in the coming decades, said BHP Billiton’s chief executive, as he played down fears ex-pressed by industrialising nations over “resources security”.

But Marius Kloppers also underlined the scale of demand expected from
fast-developing nations when he said that China alone may require five
times as much iron ore in the next 15 years as it had in the past 15.

By 2030, China would have more than 220 cities with populations above 1m people, said Mr Kloppers.

BHP, the world’s biggest mining group, and Rio Tinto, its
Anglo-Australian rival, are working to a December 5 deadline to agree
an iron ore joint venture production company that would pool the
groups’ operations in Western Australia’s Pilbara region.

The venture, which would dominate the global iron ore industry, is
opposed by steelmakers in China, Japan and Europe, which say that it
would restrict competition.

The European Commission is expected to be the most significant regulatory obstacle to the joint venture.

Mr Kloppers said that, between now and 2025, China may require 18bn-
25bn tonnes of iron ore to make steel compared with about 5bn tonnes in
the past 15 years.

“Companies like BHP, and many of our competitors, have deep commitments
to delivering re-sources for which we are contracted,” he said.

Japan’s economic rise provided a lesson to other countries because it,
too, had had fears about securing its natural resources needs said Mr
Kloppers.

“In time, and on the basis of experience, Japan came to trust markets to deliver the raw materials it needed.”

Mr Kloppers also highlighted the deficiencies of the annual iron ore
negotiations to set a benchmark price, which ended in acrimony this
year when the large mining groups refused to give Chinese steelmakers
bigger price cuts than had already been agreed with other steelmakers.

In contrast, the price-setting mechanism for ex-change-traded
commodities was “very transparent, accessible to multiple parties and
fully reflects global supply and demand dynamics,” he said

“Commercial market mechanisms will ensure that developing nations’ raw
material demand is met, that suppliers obtain sufficient investment to
meet demand and that new deposits of raw materials are discovered.”

Australia’s mining sector is expected to benefit materially from rising demand from Asia, led by China.

“Beyond this colossal size, the mining sector is growing at almost
twice the rate as the rest of the economy,” said Mr Kloppers said.

Source: Financial Times

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