Monday, December 23, 2013

Strong Demand from China Will Fuel the Growth of the World’s Biggest Miner

By Sarfaraz A. Khan and Gohar Yousuf

The world’s largest mining company BHP Billiton (BHP) is quite optimistic about its future. The business anticipates a 75% increase in commodity demand in the next 15 years driven by China’s economic growth. The company gets nearly 30% of its revenue from China. 

However, the country's impact on BHP Billiton's earnings is even bigger than that. The company’s future is closely tied with China, which is the biggest consumer of iron ore. Despite the current slowdown, China’s economy has expanded by more than 5 times in the last 10 years. Currently, it is eyeing a 7.5% growth in its gross domestic product for 2013, which could slow down to 7.4% in 2014. However, anything above, or even close to 7%, is considerably more than the expected growth rate of some of the other leading economies. Moreover, by 2028, around 250 million people in China will move to the cities from rural areas, which will fuel the demand of commodities in general, and iron-ore in particular. BHP Billiton wants to capitalize on this growth and is aiming to expand its annual production by 8% for the next two years.

In the previous quarter, BHP Billiton posted an  ... read full article on GuruFocus