BHP Billiton remains hesitant about the pace of the global economic recovery.
In the 2009-10 annual report, released yesterday, directors said “We believe that the recovery momentum of the major economies will remain uncertain as the impact of fiscal and monetary stimuli fades.
"Therefore, we are still cautious in our short-term view of the economy.
"In the longer term, we are encouraged by the fundamentals underpinning sustained growth in China and India, which will continue to drive a strong demand for our products.
"This, along with our strong balance sheet, supports our capacity for future growth.
"We have extensive experience operating in emerging resource regions and we have the capability to capture additional opportunities as they arise."
And even though the Chinese economy now looks to be landing ‘softly’ as the government slowed demand and stimulus, especially in housing, the country’s huge appetite remains BHP’s biggest sales and profit driver, and biggest danger, as the company again highlighted in a section detailing the risks (upside and downside) to the business.
Each year BHP publishes a handy list of the importance of China to the resources industry around the world and BHP (and Australia as well).
BHP said that in 2009 (referred to as CY2009) "China represented 56 per cent of global seaborne iron ore demand, 36 per cent of copper demand, 35 per cent of nickel demand, 39 per cent of aluminium demand, 42 per cent of energy coal demand and nine per cent of oil demand.
"China’s demand for these commodities has been driving global materials demand over the past decade.
"The strong economic growth and infrastructure development in China of recent years has been tempered by the global financial crisis."
BHP said that this demand saw its sales into China generate US$13.2 billion in the 2010 financial (FY2009: US$9.9 billion), or 25.1% (FY2009: 19.7%), of our revenue.
Expressed another way, BHP’s sales to China jumped by $US3.3 billion, or 33% in the year to June this year.
In other words one in every four dollars of sales came out of China in 2009-10, compared with one in five.
The jump in iron ore prices (and to a lesser extent coal prices) accounted for most of the increase.
By way of contrast, according to a recent speech by Reserve Bank Assistant Governor, Phil Lowe
"Over the first half of 2010, around 22 per cent of Australia’s exports receipts have come from China and a further 8 per cent from India.
"These shares have been trending higher for some time and this is likely to continue over the medium term.
"There has also been a large increase in the share of resources in Australia’s total exports.
"A decade ago, iron ore and coal together accounted for around 10 per cent of Australia’s total exports.
"In contrast, over the past six months, this share has been around one third, with total resource exports accounting for 55 per cent of aggregate export revenue, up from around 35 per cent in the 1990s," Dr Lowe said in Sydney last week.
So the bottom line is, if China catches an economic cold, Australia and BHP catch the flu.
BHP shares enjoyed a sunny day yesterday, rising 18c to $38.90.
