BHP Billiton 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 $80bn (£50.1bn) 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 $80bn, the environment was different,” chairman Jacques Nasser said.
“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”, Mr Nasser said.
Asked if BHP would spend $80bn 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 $24bn to $25bn a year,” said Hayden Bairstow, an analyst at CLSA.
“Now that commodity prices have plateaued in the medium term, there is pressure on companies with the costs going up,” said Ric Ronge, fund manager at Pengana Global resources Fund, which owns BHP shares.
Much of BHP’s earnings hinges on demand growth in China, the biggest importer of iron ore, copper, nickel and other industrial staples needed to support mass urbanisation underway in the world’s number two economy.