BHP Billiton Digs Deep In Global Market

Topics: Stock market, Rio Tinto Group, Iron ore Pages: 5 (277 words) Published: December 2, 2014
BHP BILLITON DIGS DEEP IN
GLOBAL MARKETS
Group2

Introduction







Leading global resources company
A primary listing on the Australian Securities
Exchange and has a premium listing on the
London Stock Exchange, with a secondary
listing on the Johannesburg Stock Exchange
Two American Depositary Receipt listings on
the New York Stock Exchange.
Purpose : create long-term shareholder value
through the discovery, acquisition,
development and marketing of natural
resources. 

Why is the iron ore market a crucial
one in today’s global economy?







Help company to withdraw the instability
of commodities market
Great advantage : a strong market
position
Main ingredient in steel
One of the key commodities associated
with industrialization ( manufacturing car
or building skycrapers)

What impacts to the iron ore
market would have resulted
from a successful takeover of
Rio Tinto by BHP Billiton?




Control of about 75% of the seaborne iron
ore
Likelihood of iron ore price rocketing

Would it be preferable for iron ore to
be priced on the old benchmark
system, or on the new spot-price
model, and why?
Benchmark system

New spot-price model

- a system of annual contract
negotiations which set
'benchmark' prices
- with rising demand, these
prices have lagged behind 'spot'
prices which obtain in commodity
markets
- The mining companies have lost
money, as their prices were
effectively capped when dealing
with
major customers.

- steep price rises in iron ore
globally
- for Asian economies, these rises
could possibly be absorbed, for
European manufacturing, with its
fragile steel industry, the price
rises would be damaging.
- The European steel industry
complained in 2010 to the EU
Commission about possible 'illicit
coordination of price increases' by
the
big mining companies (Financial
Times, 1 April 2010).

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