Belt and road ‘a chance like no other’ for businesses, top mining firm says

BHP says companies must be ready to seize the opportunities China’s global trade initiative will bring, especially for commodity producers

PUBLISHED : Thursday, 01 June, 2017, 1:56pm
UPDATED : Thursday, 01 June, 2017, 1:56pm

China’s US$500 billion “Belt and Road Initiative” could deliver a major boost to demand for commodities, and producers must prepare to seize the opportunity, according to BHP Billiton, the world’s largest miner.

The plan to rebuild ancient trading routes from China to Europe overland and by sea is backed by hundreds of billions of dollars for infrastructure projects and has support from more than 100 nations on five continents. Investments worth US$313 billion to US$502 billion could be funnelled to 62 countries over the next five years, according to Credit Suisse Group AG.

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“‘One Belt, One Road’ is expected to trigger huge demand for resources, services and technology,” BHP’s chief commercial officer, Arnoud Balhuizen, said on Thursday in a speech in the Australian city of Melbourne, referring to the original name of the trade plan. The initiative is “an opportunity like no other, and if we’re not prepared, we will lose our competitive advantage.”

BHP gets about 43 per cent of its full-year revenue from China and a total of at least 68 per cent from Asia, according to data compiled by Bloomberg.

The trade initiative, lauded by President Xi Jinping as a “project of the century,” has the potential to generate about 120 million tons of crude steel demand, according to Citigroup. Increased appetite from infrastructure as a result of the plan will support steel even as China’s housing sector slows down, Templeton Emerging Markets Group Executive Chairman Mark Mobius said last month in an interview.

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Indian Prime Minister Narendra Modi’s plans for rural electrification, which aim to supply power to every citizen by 2019, and the drive to provide more affordable housing, will also boost commodities and are likely to “have a material impact on demand for coal, iron ore, copper and petroleum,” Balhuizen said.

BHP sees global demand for potash growing at 2 per cent to 3 per cent a year until 2030, as the world’s population rises and crop demand swells by 50 per cent by 2050, he said. BHP may seek board approval for its Jansen potash project in Canada as early as next June, the producer said last month.