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Global firms take diversified path to boost demand

By Du Juan (China Daily) Updated: 2014-07-17 08:39

Multi-pronged approach, lower costs among strategies adopted by mining giants to offset flat demand in a sluggish market, reports Du Juan

A growing number of international mining giants are relying on diversified businesses to deal with flat demand for iron ore stemming from China's economic slowdown.

China's fast growth over the past years created huge demand for raw materials such as steel and iron ore, said Andrew Mackenzie, chief executive officer of BHP Billiton Ltd, the world's biggest diversified mining company, headquartered in Melbourne, Australia. But such demand will be hard to sustain, he said.

Global firms take diversified path to boost demand
Global firms take diversified path to boost demand
"We will see growth coming from energy sectors, including oil, natural gas and coking coal, instead of iron ore and steel, in China," Mackenzie said.

"It is hard to predict how fast the growth will be in those sectors, but we are happy with our diversification, which is our core competitiveness," he said.

BHP has invested in two major non-ore sectors: energy and agriculture-related businesses, which have helped prepare the company for the next round of growth.

"We have acquired good assets in energy and fertilizer-related units," Mackenzie said.

Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute, said China's iron ore imports have slowed since 2011 and that demand will continue to slow, forcing international mining giants to seek novel ways for survival.

BHP has been a strong player in oil and gas exploration, development, production and marketing. It commands a significant position in the Gulf of Mexico, the United States and Australia markets.

In 2013, the company produced a record 236 million barrels of oil equivalent, a year-on-year growth of 6 percent, according to its financial report.

The oil output was a little more than half that of China's third-largest oil and gas producer, CNOOC Ltd.

Though known as a mining company, BHP's petroleum business contributed to 28 percent of the company's total profit last year, according to its report.

In addition to oil and gas, the company has invested in aluminum, copper, nickel and manganese assets to meet increasing demand from these sectors.

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