BHP set to ride China’s recovery
Mining giant tips record to roll
MINING giant BHP expects China’s economic recovery to drive commodity prices this year as its Pilbara iron ore operations produced a record first-half performance.
The iron ore giant shipped 143 million tonnes of iron ore in the first half of the financial year as it built up stockpiles ahead of the Pilbara cyclone season, and 72.7 million tonnes in the December quarter – down slightly on the same time in 2021.
The Pilbara operations in Western Australia produced a record 146.4 million tonnes in the first half .
With international borders now open BHP said on Thursday labour constraints in both its WA iron ore and Queensland coal operations appeared to be easing, with only the Mt Arthur mine in NSW still hampered by staff shortages.
Despite the record Pilbara performance in the first half of the year, BHP left its annual production guidance unchanged at 278 million tonnes to 290 million tonnes, saying it expected some impact in the current half from improvements the company is making to its Port Hedland stockyards and export facilities – which are expected to help lift the company’s annual export capacity to about 300 million tonnes a year.
BHP, like Rio Tinto, warned that inflationary pressures were driving up costs across its operations. The company said the average cost of producing a tonne of iron ore was tracking towards the top of its $US18 to $US19 a tonne guidance. And BHP warned it expected coking coal costs to come above its annual $US90 to $US100 a tonne at its Queensland mines. Thermal coal costs will lift to $US84 and $US91 for the full year, well above previous guidance of $US76 and $US86 a tonne.
BHP chief executive Mike Henry said the miner expects demand for its commodities to lift through the rest of 2023, as China’s economy moves back towards stronger growth.
“BHP believes China will be a stabilising force when it comes to commodity demand in the 2023 calendar year, with OECD nations experiencing economic headwinds,” Mr Henry said.
“China’s pro-growth policies, including in the property sector, and an easing of Covid-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half. China is expected to achieve its fifth straight year of over 1 billion tonnes of steel production.”
But RBC Capital Markets analyst Tyler Broda said strong performances at BHP’s Olympic Dam and its WA iron ore operations were undermined by a failure to meet analyst expectations elsewhere at its global operations.
“Realised prices were higher than expected for coking coal and nickel and slightly lower than expected for iron ore, copper and energy coal,” he said. “Full year volume guidance remains unchanged and the Escondida copper mine (Chile) and metallurgical coal are tracking towards the lower end.” BHP shares closed up 60c at $49.68.