From The Australian:
BHP Billiton’s new chief executive, Andrew Mackenzie, has stared down a request from the highest levels of China’s new leadership for lower iron ore prices.
…During the meeting, Mr Li side-stepped his interpreter and said to Mr Mackenzie: “Lower prices, lower prices.”
While not specifically mentioning iron ore — Australia’s biggest export earner with annual sales of more than $US57 billion ($64bn), according to government estimates — the steelmaking raw material is the commodity China is most exposed to on imports from Australia.
Fresh from making his first major local speech yesterday as BHP’s new chief executive to an audience of 510 people at an Asia Society in Melbourne, Mr Mackenzie said he reminded the Premier that prices “were now at more sustainable levels” and were already “quite low”.
Mr Mackenzie stressed that he believed that Mr Li’s opening request to him for lower prices was a friendly quip. “I met him privately later and he kind of said it with a cheeky grin…Chinese are becoming more comfortable with the way in which they get their supply from world markets…And they are more accepting about the price-setting mechanism that happens through many of the things that my predecessor (Marius Kloppers) and others have introduced,” Mr Mackenzie said.
The main reason that the Chinese are more comfortable with market pricing is that they can see the coming shift in the balance of supply. Recall the NDRC’s attack on the majors for price opacity earlier this year. If anything, China has taken the lead these days with derivative pricing innovation and trading platforms. The FT has more on that today:
One of China’s largest securities brokers has acquired the commodities division of French bank Natixis in the latest move by a Chinese group to expand into overseas derivatives markets.
The Hong Kong branch of GF Futures, a division of Shenzhen-listed GF Securities, bought the Natixis unit at the end of July for slightly less than $40m in cash, according to an emailed statement and a person close to the deal.
The move is the latest sign of a concerted push among Chinese companies to expand into international commodities markets. Bank of China last year became a member of the London Metal Exchange, while ICBC has since last year been in talks to acquire the commodity trading business of Standard Bank.
The push comes amid hopes that Beijing will relax capital controls to allow greater participation of Chinese companies and individuals in foreign markets. Hong Kong Exchanges & Clearing last year paid £1.4bn to acquire the LME in an explicit bet on the trend.
One wonders if the Chinese won’t revere Marius Kloppers in the future and BHP shareholders curse him.
