In the company’s US annual report released today, BHP chairman Don Argus said there remained a level of uncertainty about the rate of economic growth over the short term.

“Having said that, there is evidence in the US, UK, Europe and Australia of increasing stability in financial systems and economies,” he said.

“China, which has been the major source of demand for commodities in 2009, is showing early signs of improvement, providing strong support for short-term economic growth.

“Over the longer term, we believe that emerging economies such as China and India will contribute the majority of world economic growth as they continue to industrialise, which will see demand for commodities continue to grow.”

Argus said BHP was determined to play its part and saw business leadership as part of the company’s role in achieving low carbon growth.

“To this end, we support key initiatives like the establishment of binding commitments for all developed and major developing countries.”

BHP chief executive officer Marius Kloppers expects “a more predictable demand scenario” for the company’s products in the coming financial year, as an early recovery in China is followed by restocking in major economies around the world.

“However, we do not expect a return to the same buoyant demand conditions that prevailed before the global financial crisis, or a return to record global growth rates within our forecasting horizon,” he said.

Noting that China accounts for about 20% of BHP’s revenue and half of the world’s raw materials consumption, Kloppers said the reduction in the country’s lending controls in November had led to an increase in real estate and mortgage lending, supporting an increase in construction and the materials BHP supplies.

“Also, the infrastructure stimulus measures announced to improve China’s rail, road and air transport links will, in due course, create a need for raw materials.

“Therefore, we expect the resource-intensive nature of Chinese growth to substantially drive global raw materials consumption.”

Looking at coal markets, BHP said spot shipments of metallurgical coal towards the end of June were settled at premiums of 5-25% above the Japanese benchmark ($US129 a tonne for premium hard coking coal).

On the back of rising Indian demand, BHP said thermal coal prices stabilised around $60-75/t over May to June, and sales had recently occurred at a $10-15 premium to Atlantic prices.

Argus is set to retire next year, handing the reins over to former Ford Motor Company boss Jac Nasser.

Shares in BHP are up 1.2% to $A38.30 this morning.