(Bloomberg) – Mining giant BHP has joined rival Rio Tinto Group to signal more uncertainty to come for commodity producers as costs soar and demand for everything from ore iron to copper trouble.
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The world’s largest mining company on Tuesday warned of an “overall slowdown in global growth” amid the war in Ukraine, Europe’s energy crisis and global currency tightening. . The commentary – from the latest quarterly production update – echoes comments from Rio last week. BHP also said cost pressures will persist over the next 12 months.
While margins are still high, both miners “are trying to prepare the market in case we see a significant drop in Chinese demand,” said Gavin Wendt, senior resource analyst at MineLife Pty said by phone. “Tougher conditions are coming at a time when the prices they get from commodities are falling, putting pressure on margins.”
Commodity prices have fallen in recent months as demand in China fluctuates and forecasts multiply in terms of recessions in advanced economies. Iron ore, the biggest source of revenue for both companies, fell below $100 a tonne last week as China addressed fresh turmoil in the besieged property market, including a wave Homebuyers boycott mortgage payments.
At the same time, miners face increasing costs. “We expect the lagging impact of inflationary pressures to continue into FY 2023, coupled with labor market tightening and supply chain constraints,” said the CEO of the company. BHP Mike Henry said in the statement.
Stimulus measures in China will boost growth there next year, Henry said. Asia’s largest economy grew only 0.4% last quarter and there is uncertainty about when government measures to boost the economy will take effect. Rio has described the headwinds in China as “significant”.
Iron giant
BHP’s shipments of steelmaking raw materials from the Pilbara region of Western Australia totaled 72.8 million tonnes in the three months ended June 30, down 1.2% from a year earlier and up 8.5 % compared to the previous quarter due to the impact of the disruption of Covid-19. That compares with the median estimate from three analysts of 73.1 million tonnes.
Last week, Rio announced a 5% increase in quarterly iron ore exports. Vale SA, which competes with BHP for No. 2 behind Rio in iron ore output, will report production figures for a later period on Tuesday.
“There will certainly be more uncertainty to be seen for some time and that is already reflected in the outlook,” said David Radclyffe, senior mining analyst at Global Mining Research Pty Ltd. provided by BHP and Rio. good; they are well placed” to weather the downturn.
BHP is expected to report earnings for the period on August 16. On Tuesday, it forecast iron ore production from its Western Australian operations for the year starting July 1 from 246 million tonnes. to 256 million tons, after reaching 253 million tons in 12 months of completion.
For more highlights from the BHP production report, including copper, nickel, coal production and forecasts, click here.
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