BHP CEO: Clean Energy Won’t Eliminate Commodities Demand

Many companies are now transitioning towards eco-friendly products and operations, and some experts fear commodities demand will take a hit.

Speaking at recent event in Lausanne, Switzerland, Andrew Mackenzie, CEO of BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT), explained that he doesn’t think that’s the case.

He feels raw materials consumption won’t be impacted by new sources of renewable energy. “Some people believe that renewable energy will reduce the world’s total commodity demand, I disagree,” Mackenzie said.

He elaborated by providing examples of how certain eco-friendly methods and materials require commodities such as copper for functionality.

“China, the world’s largest consumer of commodities is also on track to become the global leader in clean energy technology. And renewable energy infrastructure will generate greater demand for commodities,” he said. “Wind turbines, for example, are copper and steel intensive.”

Mackenzie also pointed out that electric vehicles require copper, as does the electricity that powers them. Plug-in hybrids and battery-powered electric vehicles reportedly use more than two and more than three times the amount of copper used in conventional cars, respectively.

He also noted that steel mills and copper smelters will require higher-quality raw materials for operation as the switch to clean energy continues. “Structural premiums will emerge for higher quality iron ore, metallurgical coal and copper concentrates,” said Mackenzie.

“Some forecasts predict the world will need to spend $3.7tn annually to develop and upgrade its infrastructure. If we look at China’s Belt and Road Initiative, demand for steel is expected to increase by an additional 150m tonnes over the next decade,” he added.

While clean energy wasn’t a concern to Mackenzie, he did caution attendees about the effects that protectionism could have on the mining industry and the global economy with regard to free trade.

“It is our collective responsibility to champion the virtues of free trade to make sure we can compete on level playing fields around the world because those are the conditions under which business, countries and the people who live in them will prosper,” he concluded.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.