Bhp Group Ltd · ASX:BHP
Bhp — BHP Billiton — Investor Presentation (September 2009)
44 slides from Bhp's investor presentation, Sep 16, 2009
Slide 1: Marketing Briefing
Marketing Briefing London and Sydney 16 September 2009
Slide 2: Disclaimer
Disclaimer Reliance on Third Party Information The views expressed here contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This
Slide 3: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 3
Slide 4: Marketing – Actively Managing the Revenue Line
Marketing – Actively Managing the Revenue Line Responsible for BHP Billiton’s total revenue line of ~$50 billion Accountable for maximising the value we receive for our products Owns and manages the relationships with our customers Develops market views to optimise: – Shorter term marketing
Slide 5: A Centralised Marketing Model
A Centralised Marketing Model Centralised marketing organisation built on a common platform Marketing manages: – The physical product flow from when it is in saleable form to customer stockyard – The financial exposure including price risk, commercial risk and cash collection The marketing mod
Slide 6: One View Internally and One View Externally
One View Internally and One View Externally One view of production and inventories One view of total business with our customers One view of price risk, performance risk and credit risk Cash collected and managed from the centre Shared knowledge of market dynamics across the commodity port
Slide 7: Key Macroeconomic Indicators
Key Macroeconomic Indicators Economic Barometer Heat Index September, 2009 US EU Japan China 0 Investment PMI ng Fa Freight Volumes 5 1 lli si n ea g cr Money Supply In Construction Electricity Gen. IP 4 2 Consumer Confidence Stabilising Retail Sales Stock Market 3 Marketing Briefing, 16 September 2
Slide 8: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 8
Slide 9: The Divergent Worlds of Steel Production
The Divergent Worlds of Steel Production Monthly Crude Steel Production 5 (Mt, 3MMA) 60 4 40 3 China 2 20 Germany 1 0 0 53 60 67 74 81 88 95 02 09 95 02 09 15 5 4 India 10 3 2 5 USA Global Production 1 0 0 67 74 81 88 95 02 09 81 88 95 02 09 11 5 10 4 S. Korea 9 3 8 2 7 Japan 6 1 5 0 74 81 88 95 02
Slide 10: Chinese Market Steel Inventories: Sentiment Reversal
Chinese Market Steel Inventories: Sentiment Reversal Chinese Steel Distributor Stock Levels (11 Sep 2009) (Mt) 5.0 Rebar Wire rod HR Coil/Sheet Plate 6 Mar 2009 4.5 4.0 29 Feb 2008 9 Mar 2007 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Mar 2006 Sep 2006 Mar 2007 Sep 2007 Mar 2008 Sep 2008 Mar 2009 Sep 2009 Note
Slide 11: Emerging Markets Urbanisation is the Key Driver
Emerging Markets Urbanisation is the Key Driver Chinese Finished Steel Demand China Urban Residential Floor Space Per Capita (Index, 2008 = 100) (Square metres/capita) 175 50 Other CAGR 2.2% Construction 40 CAGR 4.4% 150 CAGR 5.4% 30 20 125 10 0 2003 2005 2007 2009E 2012E 2015E 2020E 2025E 100 Globa
Slide 12: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 12
Slide 13: Chinese Supply is Price Sensitive
Chinese Supply is Price Sensitive China Imported Iron Ore and Domestic Concentrate Production (% Share) (Mt) 80 700 Domestic Iron Ore (62% Fe Equiv) Imported Iron Ore Domestic Ore Share Imported Ore Share 600 70 69% 500 60 400 50 300 40 200 31% 30 100 20 0 (a) CY 2000 2001 2002 2003 2004 2005 2006 2
Slide 14: Chinese Domestic Cash Cost Curve
Chinese Domestic Cash Cost Curve CY2009 Concentrate Production Capacity Price/CFR Equivalent Cost Coastal Port (US$/dmt) 100 80 60 40 20 0 50 100 150 200 250 300 350 400 Iron Ore Concentrate Production @ 62% Iron Equivalent (Mt) Source: BHP Billiton. Marketing Briefing, 16 September 2009 Slide 14
Slide 15: Iron Ore: Growth of Floating Priced Ore
Iron Ore: Growth of Floating Priced Ore Seaborne + China Floating Priced Iron Ore Sales Chinese Iron Ore Imports (Mt) (Mt) 600 CAGR 350 YoY Change Trader Chinese Dom Floating Priced +29% Other Steel Mill Imported Floating Priced 300 500 Top 10 Steel Mill 35% YoY CAGR 26% 10% 250 400 +124% 200 300 15
Slide 16: Iron ore: Robust Long Term Demand
Iron ore: Robust Long Term Demand Seaborne Iron Ore Demand (Mt) 2,000 1,800 Short to medium term uncertainty will always exist 1,600 CAGR 5% 1,400 Steel is critical for urbanisation 1,200 and industrialisation 1,000 China and emerging nations 800 CAGR 8% underpin long term growth 600 400 200 0
Slide 17: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 17
Slide 18: Global Pig Iron Production Bottoms
Global Pig Iron Production Bottoms Global Pig Iron Production Trends (Index, Jan 2007 = 100) 140 Developed market demand improving from a low base. Substantially below historical levels. 130 China is now 60% global PI production. 120 110 100 90 80 China 70 India JKT 60 SB29 - Other * 50 SB 29 - Euro
Slide 19: Coking Coal: Emergence of China & Strength of India
Coking Coal: Emergence of China & Strength of India Traditional market imports reduced YTD CY2009 Total 2007 2008 2009(a) India resilient 137 134 117 China emerged to partly fill the demand gap Europe Lead time for idled re-starts should restrict China 2007 2008 2009(a) supply and support pr
Slide 20: Sustainability of Chinese Coking Coal Demand
Sustainability of Chinese Coking Coal Demand Coastal focus on growth coupled with push for larger Blast Furnaces 70% steel capacity and >70% planned steel capacity growth is in coastal provinces of China Steel mills are building larger blast furnaces to improve productivity and reduce costs La
Slide 21: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 21
Slide 22: Our Energy Portfolio
Our Energy Portfolio Fossil and nuclear fuels role in … 2006 Global Primary Energy Demand Global Electricity Generation BHP Billiton Production FY2009 11% 2% 6% 3% 6% 6% 34% 9% 16% 21% 9% 46% 36% 26% 48% 21% 11.7 Btoe 4.4 Btoe 0.1 Btoe Oil Gas Coal Nuclear Hydro Biomass and other renewable energy So
Slide 23: Significant Position in Rapid Growth Market
Significant Position in Rapid Growth Market Projected Global Primary Energy Demand Leading energy companies (100 = 2007) (PJ, Production 2008) CAGR 2007-2030E 180 Nuclear Gazprom 22,561 2.3% 170 Coal 1.9% Exxon Mobil 8,839 Gas 2.1% 160 Energy Demand 1.6% BP 8,675 Renewables 1.5% 150 Oil 1.2% PetroCh
Slide 24: Energy Consumption Intensity Potential in the Growth Economies
Energy Consumption Intensity Potential in the Growth Economies Primary Energy Consumption Per Capita (toe/capita, time series - 1965-2008) 10 CAGR 1965-2006 China 2.4% Germany 0.4% India 2.0% 8 Japan 1.7% Korea, Rep. 3.5% United States 0.4% 6 4 2 0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 4
Slide 25: Rising Incomes in Emerging Economies Underpins Primary Electricity Demand
Rising Incomes in Emerging Economies Underpins Primary Electricity Demand World Primary Electricity Demand By Region Leading Energy Companies (Less Oil) (Mtoe) (PJ, Production 2008) 10,000 CAGR 2006-2030E Middle East 4% Gazprom 21,198 9,000 India 6% Rio Tinto 6,243 China 5% 8,000 Rest of Non-OECD 3%
Slide 26: Power Generation Needs Will be Met by the Broad Suite of Fuel Sources
Power Generation Needs Will be Met by the Broad Suite of Fuel Sources Global Power Demand by Fuel Type (TWh) 40,000 CAGR 2006-2025E Other 7% Wind 12% 35,000 Hydro 2% Nuclear 3% 30,000 Coal 3% Gas 3% 25,000 Oil -4% 20,000 15,000 10,000 5,000 0 2006 2015E 2020E 2025E Sources: IEA, McKinsey, BHP Billit
Slide 27: China and India – Coal Remains Dominant But Significant Gas and Nuclear Growth
China and India – Coal Remains Dominant But Significant Gas and Nuclear Growth China – Aggregated Power Production India – Aggregated Power Production (TWh) (TWh) 8,000 2,000 CAGR 2008-2025E CAGR 2008-2025E Other 2% Other 5% Wind 5% Wind 2% 6,000 Hydro 4% 1,500 Hydro 2% Nuclear 8% Nuclear 7% Coal 3%
Slide 28: Broad Energy Portfolio
Broad Energy Portfolio Future Options Feasibility Execution Atlantis Atlantis NWS NWS Yeelirrie Yeelirrie WA WA Iron Iron Ore Ore N2 N2 Newcastle CWLH CWLH Thebe Thebe Saraji Browse Browse Third Port Exp RGP RGP 44 Saraji Exp Exp Potash Potash -- Other Other LNG LNG HPX3 Klipspruit Klipspruit CW CW
Slide 29: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 29
Slide 30: Short Term: China Support During the Downturn
Short Term: China Support During the Downturn China Cathode & Scrap Imports China Copper Raw Material Mix (Kt Copper) (Index, 2004 = 100) 400 250 Indirect Scrap Scrap Imported Blister Cathode CAGR 350 CAGR +14% Imported Cathode (Net) 200 Imported Concentrate (Net) 300 +15% Domestic mine +13% 250 150
Slide 31: Longer Term Global Growth is China Centric
Longer Term Global Growth is China Centric Global Copper Cathode Demand Breakdown Refined Copper Consumption (Index, 1980 = 100) (kg/capita) 350 Others 25 Germany United States China 300 CAGR Japan OECD 20 Korea, Rep. China 250 Actual Cu Cathode supply & forecast without new mine developments +3.2%
Slide 32: Five Factors Will Drive Incremental Annual Demand Growth
Five Factors Will Drive Incremental Annual Demand Growth China Copper cathode demand growth by source 2008 vs. 2025 (Index, %) 300 250 250 23 13 15 200 24 150 43 33 100 100 50 0 2008 Power distribution Consumer/ Machinery Construction Energy Others(a) 2025E cables Autos efficiency (a) Includes chang
Slide 33: Global Concentrate Gap Expected to Continue
Global Concentrate Gap Expected to Continue Concentrate Production (Assuming Average Past 5 years Mine Disruptions) (Kt of Copper) 15,000 Concentrate Production 14,500 Primary Smelter Capacity @ 87% 14,000 13,500 13,000 12,500 12,000 2008 2009E 2010E 2011E 2012E 2013E 2014E Sources: Brook Hunt, BHP
Slide 34: Mine Supply: What is Needed
Mine Supply: What is Needed Global Copper Mine Supply Breakdown, 2008-2020 (Mt, Copper Contained) 20 Probable Greenfield Projects Reactivations, Mine Life Extensions & Expansions (70%) 19 Base Case Mine Production 18 17 16 15 14 13 12 11 10 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E
Slide 35: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 35
Slide 36: Why We Prefer Floating Price Mechanisms
Why We Prefer Floating Price Mechanisms Benefits of a Floating Price Mechanism Market players can enjoy prices truly reflective of supply and demand conditions No “dead-lock” on pricing when there are major disparate views on the market Mitigates non-performance on contracts when spot vs bench
Slide 37: Floating Prices Can Capture Changes in Supply-demand Fundamentals Better Than Benchmark Prices
Floating Prices Can Capture Changes in Supply-demand Fundamentals Better Than Benchmark Prices Thermal Coal Prices Iron Ore Prices (US$/t FOB, 6700Kcal/kg) (US$/t FOB, 63.5% Fe) 215 190 190 165 China Spot Implied 165 (63.5%) 140 140 115 115 Japanese Fixed(a) 90 90 65 65 Newcastle Floating 40 40 Aust
Slide 38: Market Evolution in Volatile Business Environments
Market Evolution in Volatile Business Environments II. Supported by financial III. Development of adjacent I. Rise of spot sales markets markets Fixed priced commodities to Financial market follows physical Electricity and energy coal. 'market based' pricing spot, driven by a volatile spot Tra
Slide 39: Iron Ore: Evolution Continues
Iron Ore: Evolution Continues Seaborne + China Iron Ore Demand Monthly Variance Iron Ore Price (Mt) ($/dmt) 1,400 China Captive 30% China LTC Imports June, July August, 2009 China Floating Price Imports 1,200 20% September China Domestic Spot 2007 ROW Seaborne 1,000 10% 800 0% Global floating price
Slide 40: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 40
Slide 41: Freight: Economies of Scale Give Flexibility … Without the Need to "Own"
Freight: Economies of Scale Give Flexibility … Without the Need to “Own” BHP Billiton Freight Annual Volumes Dry Bulk Deliveries of New Vessels (Million dwts) (Million dwts) 150 120 Forecasts Handy (10 - 35 dwt) Supramax (35 - 60 dwt) 125 CAGR 10% 100 Panamax (60 - 130 dwt) Capesize (170 - 225 dwt)
Slide 42: Agenda
Agenda Introduction The Steel Complex: Iron Ore and Met Coal The Energy Complex: Emerging Market Story Copper: a Growing Deficit Market Why We Prefer Floating Price Mechanisms Freight: Why We Charter and Don’t Own Summary of Key Messages Marketing Briefing, 16 September 2009 Slide 42
Slide 43: Key Messages
Key Messages Economic upswing in China is well advanced however restocking has been substantial. Developed nation restock has started – will be 2010 before true demand emerges. We prefer floating price mechanisms as it minimises risk, reflects true supply demand fundamentals, and avoids issues o
Slide 44: bhpbilliton
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BHP Billiton — Investor Presentation (September 2009) on 6ix