BHP Sees Uncertainties for Iron Ore, U.S. Growth -- Commodity Comment

Date : 19/02/2019 @ 17:34
Source : Dow Jones News
Stock : Bhp Group Fpo (BHP)
Quote : 40.79  -0.14 (-0.34%) @ 17:30
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BHP Sees Uncertainties for Iron Ore, U.S. Growth -- Commodity Comment

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   By Rhiannon Hoyle 
 

SYDNEY--BHP Group Ltd. (BHP.AU), the world's largest listed mining company by value, on Tuesday reported its first-half earnings. The miner said net profit for the six months through December rose 87% year-on-year, to US$3.76 billion. Directors declared an interim dividend of 55 cents a share, unchanged on a year ago. Here are some remarks from the report:

 

On iron-ore prices:

"The Platts 62% Fe Iron Ore Fines index performed solidly in the December 2018 half year, driven by firm pig iron production and unanticipated supply disruptions. The lump premium has been strong. In the short term, the supply picture is uncertain following the tragedy in Brazil. Total demand in the 2019 calendar year is expected to be similar to last year."

 

On oil markets:

"Crude oil prices were volatile in the second half of the 2018 calendar year. Brent crude hit a four year high ahead of U.S. sanctions on Iran taking effect. Prices then fell sharply towards the end of the 2018 calendar year on mounting oversupply concerns, despite OPEC "Plus" announcing further production cuts in December 2018. The fundamental outlook remains positive, underpinned by rising demand from the developing world and natural field decline in supply."

 

On copper prices:

"Copper prices have maintained a relatively tight range for much of the December 2018 half year. This period of stability followed a sharp drop associated with the trade tensions that escalated in the June quarter of 2018. Against this backdrop, we believe underlying fundamentals remain sound. Copper demand should grow steadily. Grade decline, rising input costs, water constraints and a scarcity of high-quality future development opportunities continue to constrain the industry's ability to cheaply meet this growing demand and provide support for our positive outlook."

 

On steel markets:

"Global steel production has maintained healthy growth in the 2018 calendar year. Growth is expected to slow in the 2019 calendar year, along with the global economy. Margins have begun to normalize from the extremes seen in the initial stages of steel supply side reform in China. That is an anticipated development. We expect quality differentiation to remain a durable element in price formation for steel-making raw materials."

 

On coal:

"The Platts premium low-volatility metallurgical coal price index finished the 2018 calendar year strongly, with healthy demand conditions, especially in India, set against a modest recovery in seaborne supply. China's import policies remain a source of uncertainty. Over the longer term, India is expected to sustain strong demand growth, while high quality metallurgical coals are expected to continue to offer steelmakers value-in-use benefits in mature markets."

 

On the U.S.:

"The U.S. performed strongly in the 2018 calendar year but near-term prospects are less certain. The expansionary impact of tax cuts will progressively fade and trade policies remain unpredictable."

 

On China:

"We expect China's economic growth to slow modestly in the 2019 calendar year. The negative impact of weaker exports will be partially offset by easier monetary and fiscal policy. In our view, China's policymakers will continue to seek a balance between the pursuit of reform and maintenance of macroeconomic and financial stability. Over the longer term, we expect China's economic growth rate to decelerate as the working age population falls and the capital stock matures."

 

On the potash market:

"Potash prices have performed strongly over the last year, despite several major capacity additions coming online. Demand lifted again in the 2018 calendar year, following a record in 2017 calendar year. We expect annual demand growth of between 2-3% over the next decade, resulting in demand exceeding available supply from existing and forthcoming capacity by the mid-to-late 2020s."

 

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

February 19, 2019 01:19 ET (06:19 GMT)

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