Resources for a growing world

At BHP Billiton we provide resources for a growing world. Products, based on our commodities are used by billions every day. 

So we’re focused on learning how people’s lives are changing around the world.

We have people on the ground, talking to customers, and people back at the office, tracking usage and monitoring trends. Where commodities are concerned we're always learning and discovering.

This rich blend of information gives us a distinctive view of the world and its Prospects.

We will use Prospects to highlight the major economic and commodity market trends that we’re watching. 

We’ll look at whether China has too much debt and if its demand for steel has peaked. We’ll investigate trends in renewables and what this means for long run energy supply. We will assess the impact of electric vehicles on future demand for oil. We will consider what could make or break the Indian growth story; we’ll assess which regions are most vulnerable to the commodity downturn; and we will delve into the technological forces behind the bullish thesis for copper. 

But first let us take you through how we form our views…

Analysing demand from the ground up

Our Marketing team is responsible for our economic and commodity market views, and the proprietary analysis they conduct will be the basis of our initial posts.

To understand how our markets might evolve, we conduct detailed studies into the way our commodities are used from the mine gate to the high street.

Ores are smelted into metal; oil is refined into gasoline; potash ore is converted into fertiliser; metallurgical coal is consumed in steel making; thermal coal, uranium and gas are used in electricity generation. These products in turn are used to create our houses, cars, computers and even food.

We build granular models of every step of commodity use. The analysis is broken down by country and region, sector and sub-sector. These models are combined with macro-economic analysis to predict how developments outside the immediate world of commodities will influence our markets.

This detailed analysis helps us monitor how consumer demand evolves over time; to focus our research on what’s most important; and recalibrate swiftly when circumstances shift.

We examine how building techniques might change, and estimate what this will mean for copper and steel. We anticipate the trajectory of fuel efficiency standards for new cars, and assess how this will affect the oil market. We research the potential for substitution away from and between commodities, whether that’s switching gas for coal, or aluminium for copper, or plastics for metals.

Having teams on the ground, talking to customers every day, helps us deepen our analysis. We observe property developers in China; air conditioning manufacturers in India; petrochemical plants on the US Gulf Coast; machinery makers in Japan; auto makers in Germany and shipbuilders in Korea; to assess how global demand might grow and who will contribute the most to it.

Detailed supply modelling

Modelling demand trends is only half the battle. We also need to understand the direction of supply.

Our models of commodity supply are based on our proprietary long run cost curves for each of our products. These are based on a detailed assessment of the costs faced by the industry across major production centres and an assessment of the future path of macro-economic factors – like exchange rates, labour supply and inflation.

Depending on where we are in the commodity cycle, prices are either set by the cost of bringing on new production or the scale and duration of losses high cost producers must make that would see them exit the market. Our world class operational knowledge is critical to our assessment of industry dynamics. While the demand forecasting team splits much of their time between the office and the airport, our supply forecasters sit with our assets and are accordingly issued hard hats and reflector vests.