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BHPB warns of steel glut- 29 Aug 10

The world''s biggest miner BHP Billiton signaled a looming slowdown in global steel making raw materials markets due to overproduction of steel.
BHPB said “Following a broad recovery in prices for the majority of BHP Billiton’s products, the short term outlook for commodities is mixed. There is strong physical demand for some commodities, such as copper, where consumers are restocking and premiums continue to rise. Elsewhere, there is weaker demand for those commodities where short term demand is likely to be satisfied by inventory rather than primary supply.”
It said “With global steel production running ahead of real demand in the quarter ended June 2010, we expect output to soften from the record highs achieved in April this year. This will impact near term demand for steel making raw materials, however the fundamentals remain strong in those commodities, particularly iron ore, where there is a lack of low cost supply response expected over the next one to two years.”
It added that “In the medium term, we expect commodity demand to remain heavily dependent on emerging market demand as the gradual withdrawal of government stimulus is expected to constrain growth in the developed world. While China’s rapid growth is expected to slow from recent highs, domestic consumption is expected to remain strong and investment spending is likely to remain commodity intensive.”
BHPB also said “There is no change to our expectation of strong growth in demand for our commodities in the longer term. With long run prices determined by the marginal cost of supply, our position at the lower end of the cost curve is expected to underpin strong margins and investment returns.”

Aug 29, 2010 13:35
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