BHP warns commodity markets to cool further

Wed May 16, 2012 4:09am EDT
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By James Regan

SYDNEY (Reuters) - BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) said it expects commodity markets to cool further and that investors have lost confidence in the longer-term health of the global economy, in the most cautious comments yet from the world's biggest miner.

BHP also put the brakes on a plan announced by Chief Executive Marius Kloppers in 2011 to spend $80 billion over five years to expand its iron ore, coal, energy and base metals divisions, banking on continuing high demand from its main market, China.

"It is all about appropriate allocation of capital. When Marius (Kloppers) talked about the $80 billion, the environment was different," Chairman Jacques Nasser told reporters after a Sydney business lunch on Wednesday.

"We should pause, take a deep breath and wait and see where the pieces fall around the world," he said, stopping short of announcing a spending cut.

The company was re-thinking its expansion plans "every day," Nasser said.

Asked if BHP would spend $80 billion over five years, he replied: "No."

"It's a sign that their view is that commodity prices are not going to go up from here, and in that sort of scenario, you can't be spending $24 billion to $25 billion a year," said Hayden Bairstow, an analyst at CLSA.

BHP shares tumbled 4 percent to the lowest since July 2009, while the broader market .AXJO fell 2.2 percent. The Australian dollar slid to its lowest since December.   Continued...

BHP Billiton Chairman Nasser speaks at a business luncheon in Melbourne in this May 9, 2011 file photo. REUTERS/Mick Tsikas