By Rhiannon Hoyle
SYDNEY--The head of BHP Billiton Ltd.'s coal business signaled
confidence in the outlook for the strained global coal industry,
forecasting increases in world demand for decades to come.
Dean Dalla Valle said he expects most demand growth to come from
outside China, which has been the primary driver of global
commodity prices in recent years. China currently accounts for
about half of the world's coal consumption.
"Over the next couple of decades we expect global growth in
demand for both energy coal and metallurgical coal," he said in a
speech in Brisbane Wednesday. Although "the likes of India, a
country not overly endowed with metallurgical coal, [is]
anticipated to be the most significant source of new demand" for
coal used in steelmaking, he said.
India is the world's third-largest importer of coal, after China
and Japan, according to the World Coal Association.
China, the largest producer of metallurgical coal, will continue
to be a major importer of the raw material from mining hubs like
Australia and Indonesia, Mr. Dalla Valle said. Additional Chinese
demand for steelmaking coal is expected to be mostly met by
domestic mines.
Demand for energy coal, otherwise known as thermal coal, is also
expected to rise--although Mr. Dalla Valle acknowledged growth
rates will likely be lower than for other energy sources like gas
and renewables.
"Coal is expected to remain the centerpiece of Asia's energy
portfolio into the foreseeable future, where coal is the cheapest
and most readily available source of energy," said Mr. Dalla Valle.
Coal demand in Europe has also been rebounding, he said, as nuclear
plants are slated for closure and some countries seek to cut their
reliance on Russian gas supplies.
Coal prices have lately been languishing near multiyear lows.
New mines that had planned to capitalize on earlier high prices
started production, which left the market with a glut of raw
material. Thermal-coal prices in Australia have been trading near
their lowest level since late 2009, while metallurgical coal is
near a seven-year low.
This has forced producers like BHP to close operations, lay off
workers and pursue improvements in productivity in an effort to
keep mines profitable. BHP--in alliance with Mitsubishi Corp. and
Mitsui & Co. Ltd.--is the world's largest exporter of
metallurgical coal and a major producer of energy coal.
Australian miner New Hope Corp. recently said it expects global
coal markets to remain awash with supply and prices to remain weak
for at least another year.
Still, Mr. Dalla Valle reiterated the importance of coal in
BHP's business. The miner manages 20 coal mining operations in
countries including Australia, Colombia and South Africa.
"These recent drops in prices should be viewed in perspective,"
given prices still remain well above historic lows, he said. Mr.
Dalla Valle said the company would continue to target further
productivity improvements.
On Tuesday, BHP suggested it might pursue further asset sales or
look to spin off unwanted operations as it puts more emphasis on
commodities such as iron ore and petroleum that already account for
the bulk of its earnings. It said focusing on coal along with iron
ore, copper and petroleum would generate higher increases in cash
flow and better returns on investment, while potassium-based
fertilizer potash could also become a major business.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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