Xstrata predicts renewed commodities boom
Geneva — Anglo-Swiss mining group Xstrata yesterday reported a 41 per cent drop in its annual profit in 2009 and pinned its hopes on a renewed boom in commodities demand in China and other emerging economies. Xstrata chief Mick Davis predicted that commodities markets would shrug off depressed demand and prices triggered by the financial and economic crisis in 2008 and 2009 and return to a situation where demand would outstrip supply.

Preliminary results released by Xstrata showed that attributable profit minus exceptional items slumped to $2.77 billion (2.02 billion euros) with the global slowdown in industrial production early last year. A late recovery in commodity prices was offset by the weaker dollar, while improved demand from Asian economies investing in infrastructure was balanced by "a more anaemic response in OECD" economies," Xstrata said in a statement. Revenue fell 16 per cent compared to 2008, reaching $23.53 billion.

Chief executive Mick Davis said: "In my opinion, the medium-term outlook for commodity demand remains very promising, driven by the ongoing urbanisation and industrialisation of high-growth, populous economies, with China and other industrialising countries taking active steps to rebalance their economies towards domestic consumption-led growth over the next decade." While industrialised OECD economies showed short- and medium-term signs of recovery, credit expansion was still sluggish there, he added.

"Against this background, the shift of emphasis in Xstrata’s strategy to a phase more dominated by organic growth is timely and coincides with our view that the supply of many commodities will struggle to keep pace with demand growth," Davis said. Strong demand for commodities such as metals, coal and energy products prior to the crisis, especially to fuel China's economic boom, prompted global prices to soar as deliveries of raw materials struggled to keep pace with industrial production. Xstrata, which last October dropped plans to buy its South African rival Anglo American, said it was still interested in promising acquisitions and intended to invest $9 billion in new mining projects this year. — AFP