Canberra, Australia – MININGREVIEW.COM — 27 May – BHP Billiton – the world’s top miner – has voiced doubts about the durability of the recent strong Chinese demand for commodities, and has expressed the opinion that the picture for global demand is unclear.
Reuters reports that 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% so far this year.
But BHP chief executive Marius Kloppers – in giving a cautious market outlook in a speech to a mining conference here – pointed out that average commodity prices were still about 50% below their peaks, although he later declined to comment to reporters on recently re-negotiated iron ore prices.
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.
China reported record imports of iron ore for April – another sign for commodity-market bulls that the wider rally has firm foundations – but Kloppers said the global demand picture was still unclear, and should take around six months to resolve.
He added that China’s current build-up of stocks did not entirely reflect underlying demand, and was tied to China’s massive US $587 billion (R5 300 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,” Kloppers told the conference.
He went on to say that the picture had been further muddied by uncertainty over when members of the Organisation for Economic Cooperation and Development (OECD) 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 declared.
“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.”