bhp and rio singing the same song

STRONG fundamental demand for raw materials out of China and India would eclipse any drop in US demand caused by the bad debt crisis, BHP Billiton chief executive Chip Goodyear told investors yesterday.

Speaking after delivering a new Australian record profit of $US13.4 billion ($16.7 billion), Mr Goodyear said that for the first time in modern history, the absolute growth in the economies of China and India would outstrip that of the US this year.

He said that panicky news programs in the US and Europe that focused on the financial crisis were "missing what is really happening in the global environment".

He said the ructions in the US and European credit markets would not have the same effect on the global economy as they would have had 10 to 20 years ago because of the demand emanating from China.

Mr Goodyear shrugged off concerns that a US downturn could hurt China's exports, saying China's economic growth was being driven largely by its domestic demand and that China's economy could be expected to grow at close to 10 per cent in 2008.

"If you look at what is happening in China, the (demand) is quite domestic," Mr Goodyear said.

BHP's profit report said: "Despite moderating US economic growth, global economic fundamentals remain strong and the ongoing strength shown by emerging Asian economies, including China, should support global growth."

It said the cheaper cost of producing goods in Asia should moderate global inflation and that feedback from customers was that the volatility in US and European credit markets wasn't expected to weigh materially on supply and demand.

"Our customers in China and India believe domestic supply and demand criteria are much more important factors in their markets."

BHP chief executive elect Marius Kloppers said there had been no slowdown in demand for BHP's products.

He said weaker base metal prices were partly a function of summer holidays in the northern hemisphere.
In the past month, prices for nickel and zinc had fallen about 20 per cent, and copper and aluminium prices had dropped by about 14 per cent.

"We continue to see demand as being very strong," Mr Kloppers said.

China bought $US9.2 billion worth of BHP products last year.

These were mainly iron ore, copper and nickel, which accounted for 20 per cent of total sales revenues.

India now accounts for 4 per cent of BHP's sales revenue. "India's GDP is the same size as China was 11 to 12 years ago, so we definitely see an industrialisation process that is leading, and another one that is coming behind, and that is what is making us so enthusiastic about the long term," Mr Kloppers said.