BHP Sees Uncertainties for Iron Ore, U.S. Growth -- Commodity Comment
19 February 2019 - 05:34PM
Dow Jones News
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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