BHP Billiton opens Shanghai hub, seven years after Rio Tinto’s Stern Hu affair
By Angus Grigg
BHP Billiton has taken its first tentative steps back into China, seven years after closing its office in Beijing and scaling back its presence in Shanghai following the arrest of three executives at its main rival Rio Tinto.
In a move which will double its staff numbers in China, BHP said on Monday it would open a technology development hub in Shanghai employing 50 people.
The decision appears to reverse a previous policy of taking staff out of China, amid fears they could be targeted by the authorities looking to weaken the market power of Australia’s two big miners.
At the peak of the so called “iron ore wars” in 2009 and 2010, BHP shut down its China-based economics team, closed its office in Beijing and significantly reduced its staff numbers in other areas.
Many jobs were moved to Singapore, leaving an estimated 50 staff on the mainland, a relatively small number given 37 per cent of BHP’s revenue or $US16.3 billion ($21.4 billion) came from China in the 2015 financial year.
BHP has around 400 staff in Singapore.
The pullback from BHP came around the time Rio’s former head of iron ore trading, Stern Hu, and two of his colleagues were arrested and later jailed for corruption.
There were fears at the time BHP could also be targeted by Chinese authorities, who repeatedly accused the big miners of manipulating the iron ore price and withholding supply.
Despite having its offices raided and three of its staff jailed, Rio took the opposite approach to BHP in China.
It opened a new office in Shanghai, complete with a jade horse in the foyer, as it sought to increase its engagement and presence in China.
Part of Rio’s economics team is based in Shanghai, it has large procurement and marketing teams in the city and its China operations are headed by the well-connected Ren Binyan.
Rio has around 140 staff in China.
“Compared to Rio, BHP have been very low key in China,” said one source who asked not to be named but has knowledge about how both companies operate in China.
“They [BHP] really downgraded their China office and moved most functions to Singapore.”
BHP’s surprise move to open the technology hub in Shanghai will see its staff numbers in China double to around 100 with an initial investment of $US5 million.
“Shanghai is widely recognised as a global centre for mobile application development with a vibrant tech culture,” said BHP’s chief technology officer Diane Jurgens.
“It has a wealth of highly experienced, skilled talent and leading universities offering excellent programs in technology and engineering,” she said in a statement.
BHP will shortly open other technology hubs in Malaysia and Perth.
BHP’s move to boost its presence in China comes as the iron ore price has spiked above $US60 a tonne, taking its gains for the year to around 40 per cent.
The higher than expected price is partly to due to reports Beijing is having difficulties shutting down steel mills in a bid to reduce over-capacity, suggesting iron ore demand will stay relatively strong.
The People’s Daily newspaper, the main mouthpieces of China’s Communist Party, reported only 47 per cent of the planned 45 million tonnes of steel-making capacity scheduled to be shut down this year had been completed.