growth and evolution of commodities demand/media/bhp/documents/investors/...global commodity demand...

Growth and evolution of commodities demand

Mike HenryPresident BHP Billiton Marketing4 May 2011

New York XiningShanghai

Disclaimer

Mike Henry, President BHP Billiton Marketing Slide 2

Reliance on Third Party InformationThe views expressed here contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton.

Forward Looking StatementsThis presentation includes forward-looking statements within the meaning of the U.S. Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of BHP Billiton. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. For more detail on those risks, you should refer to the sections of our annual report on Form 20-F for the year ended 30 June 2010 entitled “Risk factors”, “Forward looking statements” and “Operating and financial review and prospects” filed with the U.S. Securities and Exchange Commission.

No Offer of SecuritiesNothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP Billitonsecurities in any jurisdiction.

Non-GAAP Financial InformationBHP Billiton results are reported under International Financial Reporting Standards (IFRS). References to Underlying EBIT and EBITDA exclude any exceptional items. A reconciliation to statutory EBIT is contained within the profit announcement, available at our website www.bhpbilliton.com.

Agenda


Beliefs behind commodity demand forecasts

Evolution of commodities demand

Well positioned for diversified, tier 1 growth

Concluding remarks

Above trend GDP growth forecast for the next decade despite softer OECD fundamentals

GDP growth has two main drivers Demographic factors including the

size and age profile of a population and degree of urbanisation Productivity factors including

education, infrastructure and the efficiency of capital allocation

China will become increasingly influential Despite the global financial crisis,

global growth rates improved in the last decade Decelerating Chinese growth rates

are expected to be offset by the larger size of the Chinese economy


Global GDP growth rate (% per annum)

Source: 1900 to1980 – J. Bradford De Long (“Estimates of World GDP”, 1998); 1980 to 2010 – IMF World Economic Outlook Database; 2010 to 2025 Forecast – Global Insight.

0

1

2

3

4

5

6

1900-1920

1920-1930

1930-1940

1940-1950

1950-1960

1960-1970

1970-1980

1980-1990

1990-2000

2000-2010

2010-2020

2020-2025

Developed economies

Developing economies

0

10

20

30

40

50

60

0

2,000

4,000

6,000

8,000

10,000

12,000

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

Investment expenditure

Share of total GDP

The positive global outlook doesn’t rely upon aggressive underlying assumptions for China…


Urbanisation rates In the first half of this decade 20 million

people per year will move into cities However, the rate of urbanisation

will slow

Construction The rate of growth in construction will

decelerate in the next decade By 2025 the rate of addition of new

urban floor space will fall by half

Infrastructure New city clusters will develop requiring

new transportation and energy infrastructure Development of the Western Provinces

will be resource intensive

CAGR10%

CAGR13%

Source: Global Insight.

Investment expenditure(RMB billion, real)

Share of total GDP(%, nominal)

0

10

20

30

40

50

60

70

80

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

Consumption expenditure

Share of total GDP

…nor unrealistic assumptions for Chinese consumption growth

Consumption has grown at a rapid rate Consumption has been growing rapidly

although less than overall GDP growth Incomes will be driven by labour

productivity Rising incomes will support

consumption of goods and services

With the transition in the economy, GDP targets can be met with slowing investment In the last decade, investment growth

(~12%) has outpaced consumption growth (~8%) with resultant overall GDP growth of ~10%

Consumption expenditure(RMB billion, real)

CAGR8%

CAGR10%


Source: Global Insight.

Share of total GDP(%, nominal)

China has and will continue to enact policy to deliver a sustainable growth model

Policy is focused on sustainability Income and wealth distribution to place higher

priority on individuals Increasing domestic demand focus

Policy to further support consumption Improvements in welfare, education and health

reducing the need for precautionary savings Provision of 36 million new social housing units Shift in tax structures to promote consumption

The economic mix and structure will shift New development will take place in the west

and the interior of China More funding will be placed into research and

development, and into higher value industries


Great Hall of the People, Beijing

Importantly, China has a track record of delivering

0

6

12

18

1986 1992 1998 2004 2010

5YP target

YoY growth

5 year average YoY growth

GDP growth target versus actual growth (%)

70

75

80

85

90

95

100

105

110

0

20

40

60

80

100

120

140

160

180

2005 2006 2007 2008 2009 2010

GDPEnergy consumptionEnergy efficiency (RHS)Efficiency target (RHS)

GDP growth versus energy consumption Index (2005 = 100)

Source: China National Bureau of Statistics.


China

India

US

Eurozone

Japan

South Korea

Australia

Brazil

Canada

Chile Russia

South Africa

India 2030

China 2030

US 1980 Japan

1980

0

10

20

30

40

50

0 200 400 600 800 1,000 1,200 1,400 1,600

Source: Global Insight; BHP Billiton analysis.1. All figures for 2009 unless mentioned otherwise.

Bubble size = GDP of US$5 trillion (real 2005 PPP)

Chinese GDP is set to grow substantially to 2030


World GDP per capita1

(US$’000, real 2005 PPP)

Population(million persons)

0

10

20

30

40

50

60

0 100 200 300 400

Demographics still vary significantly across China


US

Eurozone

US 1980

Brazil

Russia

Japan

Japan 1980

Canada

Australia

South Korea

ChileSouth Africa

California

Bubble size = GDP of US$2 trillion (real 2005 PPP)

China Eastern Provinces

China Provinces (excluding Eastern)

US States

Source: Global Insight; BHP Billiton analysis.1. All figures for 2009 unless mentioned otherwise.

World GDP per capita1

(US$’000, real 2005 PPP)

Population(million persons)

Slowing growth in China simply reflects the natural progression of the economy


Source: Global Insight; IMF; Morgan Markets; OECD.

Chinese GDP growth(%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

Actual GDP growth

Global Insight

Consensus

IMF

Morgan Markets

OECD

Consensus L/T

Agenda





Concluding remarks

Source: CISA; worldsteel; Global Insight; JBS; BHP Billiton analysis. 1. Steel consumption on a crude steel equivalent basis.

Economic development is characterised by strong, early phase steel demand growth


Industrial development & steel consumption1

(kg per capita)

0

200

400

600

800

1,000

1,200

0 5 10 15 20 25 30 35 40 45 50

India today

Japan

USA

Germany

South Korea

China today

GDP per capita (US$’000, real 2005 PPP)

China/India intensity

Other country intensities

Possible path range for China by 2025

0

5

10

15

20

25

30

35

0 5 10 15 20 25 30 35 40 45 50

Source: World Bank (GDP and population); Brook Hunt; CRU; IISI; Global Insight; BHP Billiton analysis.

Copper demand intensity follows a similar path, with a longer plateau


India today

Japan

USA

Germany

South Korea

Semis copper consumption(kg per capita)

China today





0

2

4

6

8

10

12

14

0 5 10 15 20 25 30 35 40 45 50

Japan

USA

Germany

South Korea

China today

India today

Source: Global Insight; IEA; BHP Billiton analysis.

Electricity consumption continues to grow as economies mature

Electricity consumption (MWh per capita)




Slide 15Mike Henry, President BHP Billiton Marketing


40

60

80

100

120

140

160

180

0 5 10 15 20 25 30 35 40 45 50

Commodity intensity trends evolve with economic development

USA(Intensity index)

Source: World Bank; Brook Hunt; CRU; IISI; Global Insight; CISA; worldsteel; JBS; IEA; BHP Billiton analysis.



Electricity

Steel

Copper

Emerging economies

Developed economies

Global commodity demand well supported by emerging market growth

Global commodity demand forecasts Index (CY10 = 100)


0

60

120

180

2000 2010 2025

China India Rest of the world

0

60

120

180

2000 2010 20250

60

120

180

2000 2010 2025

Copper Seaborne thermal coalFinished steel

1.7 x1.5 x

1.7 x

Source: Brook Hunt; IEA; CRU; BHP Billiton analysis.

Agenda





Concluding remarks

BHP Billiton is well positioned for early and late stage economic development


1. Excludes third party trading.

Underlying EBIT margin1

(H1 FY11, %)

37%

36%

62%

19%

33%

52%

1%

14%

59%

Metallurgical Coal

Manganese

Iron Ore

SSM

D&SP

Base Metals

Aluminium

Energy Coal

Petroleum

Underlying EBIT(H1 FY11, US$ billion)

Ferrous(51.2%)

Non Ferrous(27.8%)

Energy(21.0%)

Energy Coal

Manganese

Petroleum

D&SPSSM

Metallurgical Coal

Base Metals

Iron Ore

Aluminium

0

5

10

15

0

10

20

30

40

50

60

70

80

90

Future options Pre-feasibility Feasibility Execution Other growth capex

Total spend FY11 to FY15

Commodity split

Significant investment underpins our tier 1 growth strategy


Metallurgical Coal

Iron Ore

Potash

Copper

Other

Petroleum

Strong pipeline of investment(US$ billion)

Note: Excluding sustaining capital and exploration expenditure and future investment associated with the acquisition of the Fayetteville Shale.

Energy

Non-ferrous

Ferrous

Agenda





Concluding remarks

Concluding remarks

Strong global GDP growth to continue

Increasing impact of emerging economies on global growth

China growth assumptions are realistic

Relative commodity demand intensities to evolve over time

BHP Billiton is well positioned to meet the growth opportunity as well as the evolution in demand intensities


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