By Rhiannon Hoyle
BHP Group, the world’s biggest miner by market value, on Tuesday reported a steep fall in first-half net profit due to impairment charges, but said underlying profit was steady thanks in part to higher iron ore and copper prices. Here are some remarks from the company’s half-year report.
On the copper market:
“In the near term, we expect broad-based end-user demand growth in China to continue, albeit at a somewhat slower pace than the 6% [year-on-year] rate seen in CY23. That view includes an assumption of rapidly increasing investment in lower GHG [greenhouse gas] technology for energy and transport.
We anticipate a modest recovery in OECD copper demand. A broadly balanced market is the most likely outcome for CY24. That compares to our view of six months ago that a modest surplus was likely. The major difference in the two forecasts are reductions in primary supply announced by copper producers late in CY23. Uncertainty in primary supply remains a key swing factor.”
On steel market:
“Over the next two years we expect a small further improvement in global steel production with growth led by India, Southeast Asia and to a lesser extent China. We expect that reduced drag from developed regions will also help.
In China, steel production was resilient at high levels in CY23, making it the fifth consecutive year the country produced more than 1 [billion metric tons] of steel. Weakness in the real estate sector was more than offset by healthy growth in infrastructure, machinery and autos, as well as net steel exports reaching a seven-year high.
In CY24 we expect modest growth in steel production in line with our long-held view that China’s steel production would sit at a plateau in the 1.0 to 1.1 [billion tons per annum] range in the first half of the 2020s.”
On iron ore market:
“In iron ore, conditions improved in CY23 with a broadly balanced market overall, notwithstanding volatility in pricing within the year. For CY24 we expect similar dynamics for the mass balance, but with both supply and demand growth to slow somewhat from the rates of the prior year.
Low-cost supply is not growing at a rate sufficient to displace the high-cost production which is required to keep the market balanced. Our estimate of real-time cost support sits in the US$80-US$100/ton range on a 62% Fe CFR basis, unchanged from our previous reporting period.
How effectively China’s stimulus policy is implemented, especially with regards to real estate, and how the government chooses to regulate steel production, are both swing factors in CY24.”
On metallurgical coal market:
“In the near term, based on public company guidance we expect a modest supply recovery from Australia into the seaborne market. The availability of land-borne imports and the operational performance of Chinese domestic mines are key uncertainties for assessing China’s role in the seaborne trade in CY24.
On seaborne demand, India is expected to maintain its current strong momentum while we believe that OECD importing regions are likely to see a gradual pickup in their steel industries.”
Write to Rhiannon Hoyle at [email protected]
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