Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Macquarie Conference – Feeding the Dragon 2004
22 slides from Bhp's conference presentation, Jul 1, 2004
Slide 1: Can we feed the Dragon? Will China demand overwhelm supply?
Can we feed the Dragon? Will China demand overwhelm supply? Clinton Dines BHP Billiton Macquarie Conference – Feeding the Dragon London July 1st 2004
Slide 2: Forward-looking statements disclaimer
This document contains certain forecasts and forward-looking information. Such forecasts and information are not a guarantee of future performance and involve unknown risks and uncertainties, as well as other factors, many of which are beyond the control of BHP Billiton. Actual results may differ ma
Slide 3: China – will demand overwhelm supply?
China – will demand overwhelm supply? • We expect China to be a large and sustainable consumer of imported raw materials • Given the suddenness of China’s emergence as a notable discontinuity in the markets, we believe that short term price volatility will characterize the market in the short term •
Slide 4: We expect China to be a large and sustainable consumer of imported raw materials
We expect China to be a large and sustainable consumer of imported raw materials • China is a large consumer but short of resources • China’s consumption as a % of the world total doubles every decade and is accelerating • Urbanisation and associated infrastructure are the key drivers • China’s reso
Slide 5: China is a large consumer but short of resources
China is a large consumer but short of resources China % of world production and consumption 2003 29 20 20 10 12 5 6 7 5 Iron Ore (Sea) Copper Alumina Nickel -6 Oil -2 -10 -15 -29 Demand Supply Balance BHP Billiton China Source: CRU, IEA, BHP Billiton Page 5 6/29/2004
Slide 6: Consumption, as a % of the world total, doubles every decade
Consumption, as a % of the world total, doubles every decade China % of world consumption (Al, Cu, FeOre, Ni) 30 15 7 2 3 1970 1980 1990 2000 2010 BHP Billiton China Source: Macquarie Research Page 6 6/29/2004
Slide 7: Urbanisation and associated infrastructure are the key drivers of growth
Urbanisation and associated infrastructure are the key drivers of growth China urbanisation - %; population in millions 100% 90% 80% 484 618 70% 920 % Urban 60% 50% 40% 808 726 511 30% China 20% 0 10 20 30 40 2003 2010 2025 PPP GDP $ '000 Rural Urban BHP Billiton China Source: China Statistics Year
Slide 8: Urbanisation and associated infrastructure are the key drivers of growth
Urbanisation and associated infrastructure are the key drivers of growth Chinese urbanisation (%) per GDP/capita category GDP (US$bn) breakdown 28 61 4768 86 54 29 1550 757 12 11 18 591 667 830 2 2002 2010 2025 2003 2010 2025 >$6.5K $4-6.5K $0-4K Rural Urban BHP Billiton China Source: China Statisti
Slide 9: China's resource intensity will be a function of a Chinese continental maritime model
China’s resource intensity will be a function of a Chinese “continental maritime” model Chinese steel consumption by category 2003 Other 11% Roads 4% Capital Goods 17% Construction 68% BHP Billiton China Source: BHP Billiton Page 9 6/29/2004
Slide 10: China's resource intensity will be a function of a Chinese continental maritime model
China’s resource intensity will be a function of a Chinese “continental maritime” model Chinese copper consumption by category 2003 Export Goods 8% Domestic Goods 18% Structures 74% BHP Billiton China Source: BHP Billiton Page 10 6/29/2004
Slide 11: China's continental maritime growth model is sustainable and will strengthen over time
China’s “continental maritime” growth model is sustainable and will strengthen over time China’s economic resilience is attributable to: - An exceptionally high domestic savings rate - Rapid urbanisation & development of 2nd & 3rd Tier cities away from the coast - Strong domestic investment from a r
Slide 12: China's continental maritime growth model is sustainable and will strengthen over time
China’s “continental maritime” growth model is sustainable and will strengthen over time China’s sustainability is underpinned by; - Huge productivity improvements over time - Significant and sustainable factor cost advantages - Very rapid improvements in infrastructure - Declining dependence on exp
Slide 13: China's exact version of the continental maritime model is yet to be identified
But China’s exact version of the “continental maritime” model is yet to be clearly identified 35 30 Cu Consumption (kg/capita) 25 20 15 10 5 - - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP ($/capita) Taiwan Korea Japan USA China BHP Billiton China Source: Macquarie Research, CR
Slide 14: China's growth is a long term phenomenon, not just the last 2 years
Let’s not forget that China’s growth is a long term phenomenon, not just a function of the last 2 years……… China GDP growth % 15.2 14.2 13.5 13.5 12.6 11.6 11.3 10.9 10.5 9.2 9.6 9.1 9.1 8.8 8.8 7.8 7.8 8.0 8.0 7.5 7.1 5.2 4.1 3.8 1980 1985 1990 1995 2000 BHP Billiton China Source: Global Insight Pa
Slide 15: Short term spikes and cycles but no major disruptions to supply expected
There will be short term spikes and cycles but we expect no major disruptions to supply • Price development will be different for each commodity • Prices are very powerful inducers of new capacity • The gap between supply and demand will be filled BHP Billiton China Page 15 6/29/2004
Slide 16: Price development will be different for each commodity
Price development will be different for each commodity 3.5 3.0 USc per lb (real 2004) 2.5 2.0 1.5 1.0 0.5 0.0 30 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 Al Cu BHP Billiton China Source: CRU, BHP Billiton Page 16 6/29/2004
Slide 17: Prices are very powerful inducers of new capacity
Prices are very powerful inducers of new capacity Latent capacity - copper example 125 Inducement Price (USc/lb) 100 75 50 25 0 0 1000 2000 3000 4000 5000 6000 7000 8000 Cumulative capacity ('000 t) Source: Brook Hunt, BHP Billiton BHP Billiton China Page 17 6/29/2004 Theoretical long run prices req
Slide 18: The gap between supply and demand will be filled – copper
The gap between supply and demand will be filled Latent capacity - copper example 35000 30000 High Case 25000 Demand '000 tonnes Cu Possible 20000 Probable 15000 10000 Base 5000 0 2001 2003 2005 2007 2009 2011 2013 BHP Billiton China Source: Brook Hunt, BHP Billiton Page 18 6/29/2004
Slide 19: The gap between supply and demand will be filled – iron ore
The gap between supply and demand will be filled Latent capacity - iron ore example 900 750 600 mtpa 450 300 150 0 2004 2006 2008 2010 CVRD Rio Tinto BHP Billiton Kumba Indian Other BHP Billiton China Source: BHP Billiton Page 19 6/29/2004
Slide 20: Implications of the longer term global power shift for Chinese raw materials consumption
The implications of this longer term global power shift should not be ignored when thinking about Chinese raw materials consumption 45000 37500 GDP $ Trillion 30000 22500 15000 7500 0 2000 2010 2020 2030 2040 2050 China Japan US BHP Billiton China Source: Goldman Sachs Research Page 20 6/29/2004
Slide 21: Conclusions
Conclusions • Chinese growth is not a short-term phenomenon but rather has strong long-term structural underpinnings – so-called “over-heating” has been confined to certain parts of some industry sectors and regions • We expect China to continue to be a large and sustainable consumer of imported raw
Slide 22: BHP Billiton China Page 22 6/29/2004
BHP Billiton China Page 22 6/29/2004
BHP Billiton — Macquarie Conference – Feeding the Dragon 2004 on 6ix