Business / Companies

Global firms take diversified path to boost demand

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

Wei Zengmin, an industrial analyst at Mysteel, a Shanghai-based commodities consultancy, said BHP has a better portfolio than many other mining companies in terms of diversification.

"Some mining companies have various assets but all in the commodities category. As commodities prices are related to each other, it means such companies face large risks when the international commodities market becomes weak," Wei said.

Global firms take diversified path to boost demand
Global firms take diversified path to boost demand
Rio Tinto Plc, another Australian mining giant, also owns a diversified portfolio, including aluminum, copper, diamonds, thermal and metallurgical coal, uranium, gold and industrial minerals, in addition to iron ore.

In 2013, the company achieved a gross revenue of $54.6 billion, with iron ore accounting for 48 percent of the total. Aluminum took up 22 percent and copper, 9 percent, of the revenue.

China, the world's biggest steelmaker, contributed to 35 percent of Rio Tinto's revenue in 2013.

Sam Walsh, CEO of Rio Tinto, said he is confident on prospects for China's economic growth and iron ore demand.

Over the past four years, Rio Tinto has spent $5 billion on Chinese equipment and services, which helped the company maintain good trading relations with China.

Walsh said the company will continue to buy equipment and services in China, which is taken as a goodwill gesture by industrial observers.

Wei, the analyst at Mysteel, said the iron ore market is highly competitive as China's demand has flattened.

In fact, he said, it is risky for some mining companies that are not in good shape in terms of resources, costs and capacity to diversify. Some Chinese mining companies, he said, were forced to declare bankruptcy after trying to diversify into other industries.

Thus, international players still dominate the market due to their advantages in cost and capacity.

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