While average realised prices have been strong for the most recent fiscal year, BHP’s Chief Commercial Officer, Arnoud Balhuizen has warned to not get too caught up with the numbers alone.
“Prices have generally benefited disciplined owner-operators with high quality assets, particularly those producing bulk commodities such as iron ore and coal.
“We cannot get too caught up by prices through, we must focus on what can actually control. We’ve shaped our portfolio around the highest-quality assets in stable, low-risk jurisdictions and they supply premium commodities with attractive fundamentals,” said Balhuizen during his CCO in the spotlight session at the International Mining and Resources Conference (IMARC) in Melbourne today.
According to Balhuizen, productivity is at the heart of everything at BHP no matter your job title, commodity or location - operating assets in the right way creates real value.
Since 2012 BHP’s annualised productivity gains have exceeded 12 billion dollars. And while further gains will be harder, determination to be as productive as possible will never end helping the Major maximise cash flow at any point during the cycle.
The Chief Commercial Officer who has worked with BHP since 2001 is responsible for optimising value across BHP’s end-to-end supply chain. “Our Marketing and Supply teams are the link between BHP’s global operations, our customers, and our local and global suppliers. They operate on both sides of the commercial coin – maximising every dollar that comes in and every dollar that goes out.
Balhuizen explains the Company’s Marketing team secures sales and coordinates logistics to deliver BHP’s products to our customers.
On the other side of the coin, the Supply team purchases the goods and services that are used by BHP’s operations and develops sustainable relationships with both global suppliers and local businesses in our communities.
“Take for example, our recently approved South Flank project in Western Australia. Our Marketing team played a key role in analysing the product mix that will come from that mine, and customer demand for it. As we move towards production in calendar year 2021, Marketing will assess the market, and then sell to customers who value the end-product the most.
“There is also a US$3.4 billion approved spend for this project. So, our Supply team have, and will continue to, play a crucial role in directing that spend both locally in the Pilbara and globally, to maximise value for the asset and BHP as a whole,” said Balhuizen.
While Balhuizen is ‘confident’ on China and ‘optimistic’ on India, he sees copper as a highly attractive commodity in which to invest. “Copper is superbly placed to benefit from expanded end use demand on the back of trends in technology such as renewables and Electric Vehicles (EV).
“An EV requires four times as much copper as a conventional car (80 kg compared to 20kg) and we expect there will be more than 200 million EVs on the road within the next 20 years. Away from EVs, it has a diversified end-use profile that stands to benefit from late stage urbanisation in China and early to middle stage industrialisation in India and Southeast Asia,” summarised Mr Balhuizen.