Cautious BHP sees steadier ground over months ahead

MELBOURNE - BHP Billiton, the world's largest mining company, doesn't expect a sharp rebound in commodities demand and sees a protracted recovery in the global economy.

"We do expect to see stabilisation in the next three to six months," chief executive Marius Kloppers said yesterday in Canberra.

"We, however, do not expect a sharp rebound as our view is that overall world economic recovery will be slow and protracted."

Kloppers' view contrasts with Rio Tinto, the world's third-largest mining company, which on Tuesday predicted a "V-shaped" recovery. A return to sustained growth will need improved demand in both China and nations in the Organisation for Economic Cooperation and Development, he said.

"The Chinese Government appears to be committed to 8 per cent GDP growth and there are some early signs that support this," Kloppers said.

"For well-managed resources companies with low debt, the long-term outlook will be positive. The problem is in judging when the recovery will be."

The "worst is over" in demand for raw materials and prices for base metals may have bottomed, Goldman Sachs JBWere said this week. There are early signs China's 4 trillion yuan ($940 billion) stimulus is boosting that nation's economy, Australia's Treasurer Wayne Swan said.

"China's construction rate and real estate sales have shown recent positive improvements," Kloppers said. "If these trends continue in the second quarter, they will give us all reason to be cautiously optimistic."

A recovery in the global economy could begin this year and there has been some encouraging data recently, the Organisation for Economic Cooperation and Development's Secretary General Angel Gurria said last week.

A major catalyst for a recovery will the completion of the drawdown of stocks in developed nations, Kloppers said. "When this happens, we will see buying commence reflective of this new level of industrial activity."

- BLOOMBERG