BHP boss: nationalism a potential threat to world economy

Martin Farrer
Photograph: Kim Kyung Hoon/Reuters

The rise of nationalism and governments that interfere in markets pose a threat to the global economic system, the boss of BHP, the world’s biggest mining company, has warned.

Despite announcing a 124% rise in profits to $US8.31bn (£6.84bn), helped by booming iron ore sales to China, Andrew Mackenzie said on Tuesday that there were “a number of things abroad” that were causing concern for the Anglo-Australian behemoth.

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The standoff between the US and China was a concern for the company, he said, and could threaten the company’s bottom line and the wider global economy trade.

“The US-China relationship is a consideration for us,” Mackenzie told reporters on a media call in Melbourne. “We continue to enjoy strong sales to China. But no doubt this [trade standoff] will put a dampener on world economic growth. Ultimately it will impact demand for our products.

“More generally there are number of things abroad … increased nationalism, increased assertion by governments to interfere in global supply chains and capitalism … that is a consideration.”

The chief executive’s thinly veiled reference to Donald Trump’s decision to impose tariffs on Chinese imports into the US reflects BHP’s delicate position straddling the world economy.

BHP’s huge profits come from operations around the globe, and the company and its shareholders have benefited enormously as it has fuelled China’s expansion with raw materials such as iron ore, coking coal and copper. The final payout of $4bn to shareholders announced on Tuesday makes a record total of $17bn for the year, with final dividend of US78c per share.

But as the US-China trade standoff develops into a broader clash over currencies and regulation, it appears to threaten the rules-based order that has paved the way for the rapid growth of emerging economies in the past 30 years.

Mackenzie said that BHP enjoyed a healthy and balanced relationship with Beijing, but that he “completely gets” the need for countries such as Australia, whose biggest trading partner is China, to respect traditional alliances that had “underpinned and given rise to the liberal approach” enjoyed in the west.

“It’s not an easy balance to manage,” he said, adding that he thought politicians in Australia, where BHP has its operational headquarters, were doing a “reasonable” job.

Mackenzie also faces a conflict over the need to develop resources while taking what he called a “responsible approach to global warming”.

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In July he said the impact of climate change was “indisputable” and although the company is planning to wind down its thermal coal business – ie, coal used for power generation – he would not be drawn on a timetable. “We don’t intend to invest and grow the business,” he said, but the company would continue to review its portfolio of assets.

Mackenzie’s remarks about China came as Scott Morrison, the Australian prime minister, called on Tuesday for a “new set of rules” to manage world trade.

The Australian government faces the same delicate balancing act as BHP in its approach to China, especially as the mounting political crisis in Hong Kong brings the prospect of some form of intervention by Beijing to quell the protests.

Having taken millions out of poverty, China needed to enter a new phase, Morrison said. “Having achieved that critical mass of economic performance, the rules that apply to all of us – the US – have got to apply in China as well,” he told Channel Seven .

Morrison said both China and the US were “wrestling with this massive change”, arguing there is “no doubt that the economic rise of China has had a profound impact for processing and manufacturing in the US”.

“The US has made some very legitimate points about the nature of trading relationship. And so we just engage in both.”

Minutes released on Tuesday from the Reserve Bank of Australia’s board meeting earlier this month showed the the US-China dispute was a factor in the bank’s downgrade of Australia’s growth outlook. “Uncertainty about how these disputes would play out and how effective domestic policy measures would be in supporting Chinese demand continued to be an important consideration for the global growth outlook and, from an Australian perspective, the future demand for steel and bulk commodities,” they said.