Urbanisation will support iron ore demand: BHP

By Helmo Preuss

The increase in the urbanisation of the world's population from 52% of the total in 2010 to 60% in 2003 will support the demand for iron ore, as steel intensity quintuples from 15kg per square meter living space in rural China to more than 75kg per square meter for Chinese living in cities with a population in excess of 1.5 million, BHP Billiton CEO Marius Kloppers told the Bank of America Merrill Lynch Global Metals, Mining and Conference on Tuesday.

"We expect Chinese crude steel production to reach 1.1 billion tons per annum by 2025.

This equates to a 650 million ton per annum increase in global seaborne iron ore demand and provides a major opportunity for BHP Billiton and our competitors," he said.

He warned that scrap generation would be an increasingly important consideration after 2025, so the economics of BHP's iron ore projects were tested on that basis.

Turning to the outlook for copper, Kloppers said that the reduction in copper ore grades in this century after stability in the last two decades of the previous century would constrain the mine supply response to increasing demand, which was forecast to grow to near 30 million tons per annum in 2025 from 15 million tonnes in 2000.

"Our strategy has remained unchanged over the past decade as it is our purpose is to create long term shareholder value through the discovery, acquisition, development and marketing of natural resources.

"That means that all investment opportunities must tick all of the boxes (the projects need to be diversified in terms of commodity, geography and market, while at the same time being large, long-life, low-cost, expandable) defined by our strategy.

"This defined our core competency and our competitive advantage. The lessons of the past have reinforced our commitment to this set of values," Kloppers said.

BHP Billiton currently has 22 projects in execution.