BHP Billiton Hedging Bets on Potash Mine: Wrathall

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Aug. 20 (Bloomberg) -- Jeremy Wrathall, head of global natural resources Europe at Investec, discusses the decision by BHP Billiton to go forward with investment in its own mine as the potash market falls and examines the state of the mining industry and how to approach it as an investor. He speaks on Bloomberg Television's "The Pulse."

It is quite a complicated situation.

I think they were politically motivated against russia on a political basis.

It is almost difficult to disentangle exactly what is going to happen.

He stated the price may drop to $300 per drum, which i think is where it will settle.

They will produce as much as they can.

They have had production problems in the past and they have had serious issues when they have tried to accelerate reduction.

The overall demand picture is still extremely good.

I anticipate it picking up as the world goes towards a meat- based diet.

You will need more potash to fertilize the land banks.

It has been about being good with your capital and reducing capital expenditure.

That has been the big debate.

When you look at glencore xstrata, bhp, who is best for shareholders?

Who has it right in terms of paste capital reduction and getting ready near term to give some capital back?

Or is that overly ambitious?

It is the question everyone is facing right now.

The three major miners are very different.

Glencore give you much more exposure to base metals.

Therefore, you are telling yourself to that and also the trading business.

Bhp signaled strongly that they will cut capital expenditure in order to keep supply constrained and to see demand -- to allow commodity prices to stabilize.

That is the major message to the market today.

Rio tinto are full speed ahead in their domination of the iron ore business.

80% of their business is iron ore.

360 million tons over the next three or four years.

They will be the super major in iron ore.

It depends on where you want to play your money.

Where do you want to play your money?

My last analyst says it makes sense with glencore xstrata, copper will be a main driver.

I agree with that.

Copper stands out with supply demand fundamentals still excellent.

There is no substitution for copper really.

In terms of what china needs, copper is that.

They are also focusing on development going forward.

If you want exposure to copper, and i think it is a great place to be, then glencore would be my topic right now.

Going forward, rio tinto with iron ore would be my pick.

Glencore has a huge trading business.

They have that real vision of what is going on in markets.

Is that a big plus in the glencore-xstrata story or is that a risk in the trade?

I think it gives it a distinct advantage.

But it is much more opaque.

You cannot predict what they are trading.

You cannot say, this is the copper price, this is the supply, this is how much they will reduce and you can turn out a profit.

That is not possible for the trading business.

Thank you so much for that.

Coming up on the program, we have lots coming your way on "the pulse.' one direction, the group's is out today and it is expected to be big.

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