BHP: Warning of Sluggish Recovery

Includes: BBL, BHP
by: Wildebeest

Despite the buoyant prices seen on metal exchanges, mining giant BHP were more conservative in their expectation at their annual meeting this week.

(CEO) Mr Kloppers also warned that a recovery from the global downturn was expected to be weaker than in previous recessions.

"It is our view that we will come out of this recession less strongly than in previous cycles," he said.

"We therefore believe it won't be until mid 2010 before we see clean underlying demand that is not masked by inventory effects."

Restocking is underway in major economies, but commodity demand will depend on the strength of rebuilding inventories in industrialized countries, he added.

Asia would remain a bedrock of commodity demand, chairman Don Argus said.

"While we believe the global economic recovery will be sluggish, we also continue to believe there will be strong long-term demand for our products from the Asian region."

A theme of mine recently has been to draw attention to the weak underlying demand that is being ignored by those focusing solely on buoyant prices when concluding a recovery is well under way. Caution from the major miners will hopefully reinforce the need to consider metal prices in the context of a weak dollar and a flood of speculative money.

Disclosure: Long BHP.