Why commodity giants need to think like manufacturers

Resources companies were very matter-of-fact about cutting their capital expenditure when conditions took a turn for the worse in emerging markets, now they are facing the fact that they must act like lean, mean manufacturers.

For too long, energy and base metals giants used their big diversified structures to bamboozle investors about returns stretched out across vast geographies while shoveling cash and debt into more projects to achieve scale. That's all changing as industry giants attack the cost side of the business with the C-suite readily replacing the word "expansion" with "efficiency".

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Resource groups have reacted slowly to the end of the good times of the super cycle. Back in 2013, I argued that the mining hub of Perth was in complete denial that the best days were behind them. Since then, mining giants have cut capital expenditure, divested non core assets and put the expansion of large projects on hold. But that hasn't proved enough in the face of persistently low prices. In the case of iron ore, many blame Chinese higher cost producers for hanging in there longer than anyone would have expected.

Read MoreBHP Billiton sees evolution of iron ore market

Last week in Perth it was the world's largest resource company that folded first. BHP Billiton threw in the towel on being a resources supermarket, offering just about everything on the commodities shelf. Shareholders voted for a slimmer company, focused on iron ore, copper and energy, with the rest of the assets, mostly acquired through the merger of BHP with Billiton - to be spun off into a separate company South32.

It marks a sea change in thinking. BHP Billiton CEO Andrew Mackenzie argued the resources giant needs to be managed like a manufacturing business with output optimized to something akin to the 90 percent production levels that manufacturing CEO's target.

From Australia's mining heartland to the energy industry in Norway, the thinking is similar. Statoil's numbers man believes the decades-long commodities cycle has given industry players too much leeway to escape strict cost discipline while manufacturing companies naturally feel the pressure to cut back every few years with industry peaks and troughs.

"Commodities companies have not been under pressure for long enough," said Torgrim Reitan, Chief Financial Officer of Statoil. "They need to be more consistent through the cycle with their focus on costs."

But in BHP's case one might question if the manufacturing model that is all the rage, has gone too far? Is the resources powerhouse streamlining too much and is there just a hint of the dealmakers at work here as advisers lust after fees?

It's no secret that resource giants were some of the better fee-payers for investment banks. Many still reminisce about the lucrative fees from the merger of BHP and Billiton. One wonders if the spin off is the result of limited success in shopping assets around for sale.

In the meantime, pension funds, large holders of BHP Billiton who liked the diversified structure of the company in a cyclical industry because returns seemed safer, are right to question the way they view BHP. Manufacturers have bad years too. Less diversification can mean more sleepless nights for generally risk adverse investors that like a little spice but not too much.

Karen Tso is an anchor for Squawk Box Europe on CNBC. You can follower her on Twitter @cnbckaren