BHP Billiton Profits from Chinese Consumption

Mining stock BHP Billiton has repositioned to take advantage of China's economy emerging from investment to consumption driven

Mark Taylor 21 August, 2013 | 2:20PM

BHP Billiton is planning to unlock more cash and higher returns from fewer incremental investments next year. This is music to our ears, and we suspect also to those of the market. Surprising then is news the company will invest $2.6 billion in Jansen potash, a commodity whose market is presently in turmoil and one that is still very immature.

Still, $2.6 billion won't break the bank and can be viewed as BHP planning for China's economy emerging from investment to consumption driven. Rising living standards will demand higher-quality food and potash is potentially a key beneficiary, but this is in the longer term and the company is still taking a considerable leap of faith.

BHP was positive on the medium-term outlook, saying continued Chinese urbanisation, in conjunction with a slowed investment supply, are suggestive of a more balanced rather than oversupplied market. We concur, and a low-cost producer like BHP can thrive in that scenario.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BHP Group PLC1,636.40 GBX-1.56

About Author

Mark Taylor  is an equity analyst at Morningstar.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies