LONDON, Aug 25 (Reuters) - China's economic growth will cool from the 7 percent forecast for 2015, curbing demand for some commodities as the country completes investments in major construction projects, BHP Billiton BLT.L chief Andrew Mackenzie said on Tuesday.
The mining group's underlying net profit was more than halved in the year to June, part of a succession of bad numbers from a sector feeling the down-draft of plunging prices for iron ore, copper, coal and oil. ID:nL4N1102QO
"That 7 percent growth is always going to drift down once they complete the investment phase and they will ... require less and less new metals and steel in our case as they become more focused on the services and consumption-based economy," Mackenzie told reporters, referring to consensus forecasts for Chinese GDP. ID:nL3N1013QG
"They will trade a few basis points of growth for fixing corruption and fixing the banking sector," he added.
A downturn in Chinese economic growth, which some analysts say is already running well below officially reported levels, has sent equity and commodity markets reeling in recent weeks. ID:nL4N1101XE ID:nL3N10F3WR
BHP BHP.AX lowered its forecast for Chinese steel demand to between 935 million tonnes and 985 million in the mid-2020s, from more than 1 billion. The company also expects China's economic reforms to contribute to volatility in commodity prices in the short term.
Mackenzie said, however, that if China moves "successfully into the middle-income economy, it is good news for oil and it is good news for copper."
Prices of copper CMCU3 , mostly used in power and construction, fell below $5,000 a tonne for the first time in six years this month, while crude oil CLc1 dropped to 6-1/2 year lows near $40 a barrel.
BHP expects the copper market to be in deficit at the end of this decade as grades decline and costs rise.
One major threat to copper would come from substitution by aluminium on underground wires in China, which could take a good chunk of production.
"That says a lot about commodities, that everything is substitutable. The risk is always there ... China has got enough aluminium and they are self-sufficient on that," Mackenzie said.
China accounts for about half of global consumption of industrial metals such as copper.