A senior BHP Billiton executive has played down the impact of production cuts by miners such as Glencore, arguing that commodity prices will not be affected because most of the mines being shut down are unprofitable.
Asked if prices of key commodities such as copper would benefit from higher-cost “marginal” producers cutting back production, BHP marketing president Arnoud Balhuizen said it would not make a significant difference.
“I am quite intrigued by all the conversation about cutting down production because I haven’t seen any production being shut which is making cash,” Mr Balhuizen told journalists in London on Wednesday.
“So for me it is just a normal rational economic decision. If you have a cash negative operation you shut it but it doesn’t do anything for price. You should have done it anyway.”
Mr Balhuizen did not explicitly mention any rivals but it seems clear he was referring to Swiss miner and trading house Glencore, which has reduced production of three of its key commodities in recent months in a bid to stabilise prices battered by weaker Chinese demand.
Glencore announced this week it would suspend operations at one Australian mine and reduce output at another two as part of broader plans to cut global zinc production by 30 per cent or 100,000 tonnes.
Copper cut props up price – but only briefly
Last month, Glencore said it would suspend 400,000 tonnes of copper production at its mines in the Democratic Republic of Congo and Zambia. The copper price responded by jumping more than 5 per cent although the rally was temporary.
And in November and again in February, the London-listed group announced cuts at its Newcastle coal operations to avoid pumping tonnes into a heavily oversupplied market at depressed prices. Company executives claim the decision has helped stabilise prices.
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