The Future

BHP turns to fertilisers for growth
Global mining giant BHP Billiton is likely to raise the profile of fertilisers among its suite of products as it hunts for resources to tap longer-term growth in China.

The Anglo-Australian miner said that it is focusing on potash as an area of strategic growth in China, adding to four key markets -- iron ore, oil and natural gas, copper and coal --t hat the company had identified earlier this year as a slimmed-down slate designed to help BHP concentrate on getting better returns for investors.

"Potash can be our fifth pillar," Mike Henry, president of BHP's health, safety and environment marketing and technology, said.

BHP owns the giant Jansen potash development in western Canada that could increase global supply of the fertiliser by almost 15 per cent. The company in 2010 had also made an abortive $US39 billion ($46bn) bid for Potash Corp of Saskatchewan, which the Canadian producer rejected. Potash is seen by farmers as a more attractive resource as it produces more nutrients in plants compared with other fertilisers.

"Diets will continue to shift, requiring more agricultural product. That will mean you will need more fertiliser," Mr Henry said at a BHP event. "China will continue to be a big part of that picture."

BHP has committed some $US3.8bn to develop Jansen, but hasn't set out a clear schedule. In September, it dispatched its top project manager to run the development, adding to expectations among analysts that the miner intends to step up potash production. BHP has also shopped for partners, including Chinese companies, to help develop the project, according to a person briefed on the situation.

Mr Henry said BHP continues to evaluate partners, including potential Chinese candidates, and offered few clues on Jansen's development schedule.

"The current capital we're investing carries us forward for a few years, " he said. "We are in no particular rush to get out there. We really want to make sure we plan that project and scrub it as hard as we can."

BHP is also set to focus on energy production as another source of stable longer-term growth prospects in China, Mr Henry said. The company owns natural gas and crude oil assets.

China is the biggest customer for natural resources mined by the world's largest commodity producers, and a slowing Chinese economy has played a key role in drubbing the markets of many key BHP products. Iron ore prices have fallen some 40 per cent this year. BHP shares fell to a five-year low this week, largely blamed by analysts on plummeting oil prices. A climate deal between China and the US announced in November is likely to weigh on coal consumption.

BHP said that steel consumption in China is likely to average 3.5 per cent in the coming decade, ticking up from a decline to within a range of 0.5-1.5 per cent next year. Consumption of the key industrial metal in the world's biggest steel-producing nation this year is likely to reach 1.5 per cent, as China grapples with slower construction and real estate sectors.

Chinese steel production, a closely watched barometer of industrial confidence in the world's second largest economy, is likely to reach around 2.5 per cent this year, Alan Chirgwin, BHP's incoming vice president of marketing for iron ore, said.