China's colossal Belt and Road Initiative, under which infrastructure is being built in scores of countries, could result in about 150 million tonnes of extra steel demand, says BHP.
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In a report released on Monday the Australian miner said about 400 "core projects" from the Belt and Road Initiative (known as BRI) would cost an estimated $US1.3 trillion ($1.64 trillion) to deliver, boosting Chinese steel production and pushing it towards a peak that could be reached in the middle of the next decade.
The massive investment in the infrastructure initiative would generate both direct and indirect demand for steel, BHP said, adding that the countries where the projects were being constructed were "short of domestic steel-making capacity".
"Of the 68 countries, only 10 are net steel exporters. The rest all rely on steel imports to some extent. More than 20 countries do not have any steel smelting capacity at all."
The BHP report noted that Chinese steel producers were in a prime position to supply this steel, which meant that Chinese steel production would be sustained at a high level over the next decade.
The report did not attempt to quantify the potential benefits for BHP of the vast construction and of demand for steel. But with iron ore and metallurgical coal key ingredients in the manufacture of steel, and key parts of BHP's portfolio, China's Belt and Road Initiative augurs well for the miner.
"At its core, BRI (Belt and Road Initiative) is about infrastructure development. Power, railways, pipelines and other transport projects account for 70 per cent of the total investment in our project database. The demand for infrastructure investment in BRI regions is huge," the report said.
Despite the massive scale of this spending, BHP said a much greater amount of funding was needed to meet infrastructure needs.
"BRI projects could be the foundation for an uplift in investment from other sources, providing both basic infrastructure for business to leverage, and a reduction in implied risk given the official imprimatur that goes with BRI participation," BHP's report said.
Meanwhile, a new report from analysts at Morgan Stanley led by Nicholas Robison put a $33.50 price target on BHP, a rise of 13 per cent.
"Miners remain in a sweet spot - spot commodity prices are high, costs and capex remain low (though rising), growth aspirations are muted, balance sheets are over capitaliSed and cash flows exceptionally strong," it said.
Morgan Stanley said its top pick was BHP, followed by Rio, Mineral Resources, South32 and Iluka.
Another new report, from analysts at Macquarie Wealth Management, reiterated an "outperform" rating on BHP, and maintained its 12 month price target of $31.
Macquarie also gave a positive assessment of the first public statement from BHP's new chairman, Ken MacKenzie, which was included in the company's annual report released last week.
"Plans by Mr Mackenzie to regularly interact with investors is likely to be well received by shareholders and we believe the upcoming annual general meetings could present positive catalysts for the stock should these sentiments be reiterated," Macquarie said.
It also forecast a sale of the US onshore (shale) assets could raise $US8 billion to $US10 billion with proceeds expected to be returned to shareholders," it said.
