More hard times to come for mining companies, BHP warns

The world’s biggest mining company has warned that the recent downturn in the global commodities market could get worse in the coming months with economic growth projected to slow further.

BHP pointed to the ongoing Russian invasion of Ukraine, Europe’s energy crisis and global monetary tightening to fight inflation as key factors in ‘an overall slowing of global growth’ that could hit commodities producers hard.

The comments – made in BHP’s latest quarterly output update – echoed recent remarks from fellow mining giant Rio Tinto. BHP’s long-term rival in the space flagged ‘considerable’ headwinds in China and a weakening economic outlook in its own quarterly update last week.

Commodities prices have crashed in recent months on lower demand from China, while a broader consensus forms among economists that recessions will hit key developed economies. Iron ore – the biggest earner for both companies – fell below $100 per tonne last week as China faced fresh turmoil in its struggling property market.

Meanwhile, mining input costs look set to continue rising in the short term. “We expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints,” BHP’s CEO Mike Henry said in the update.

BHP shipped 72.8 million tonnes of iron ore from its operations in the Western Australia’s Pilbara region in the three months ending June 30 – a 1.2% decline from the same period one year earlier, but up 8.5% on the previous quarter, which was impacted by COVID-19 disruptions.