BHP Sees Steel and Copper Demand Rebound Despite Slumping Profits

BHP reported a 23% drop in first-half profits, its lowest in six years, due to declining iron ore prices and supply disruptions. However, the company anticipates a recovery in steel and copper demand, driven by central bank rate cuts and economic growth in China. BHP plans significant investment in expanding its copper operations while focusing on organic growth rather than acquisitions.

BHP Sees Steel and Copper Demand Rebound Despite Slumping Profits

BHP, the world’s largest listed miner, reported its lowest first-half profit in six years, driven by a decline in iron ore earnings and challenging global conditions. However, the company sees signs of an economic recovery, particularly in China, and is hopeful that central bank rate cuts will help revive demand for its key products: steel-making ingredient iron ore and copper.

For the six months ending December 2024, BHP posted an underlying attributable profit of $5.08 billion, a 23% decline from the same period the previous year, but slightly exceeding consensus estimates of $5.01 billion. Its shares fell 0.3%, mirroring the performance of other major mining companies. In line with the profit dip, BHP declared an interim dividend of 50 cents per share, the lowest in eight years, down from 72 cents a year earlier.

BHP’s iron ore business, which is its largest source of profit, saw earnings drop by 26% to $7.2 billion. The decline was primarily due to lower prices, with the average realized price for iron ore falling to $81.11 per wet metric ton, down from $103.7 the previous year. Additionally, the company faced supply chain disruptions caused by cyclones in Australia, which impacted iron ore shipments. As a result, BHP lowered its iron ore output forecast for the full year, revising it from the upper range of 282 million to 294 million metric tons.

Despite these challenges, BHP remains optimistic about a recovery in steel and copper demand, especially as central banks continue to cut interest rates. The company believes that these rate cuts, particularly in the U.S., will support a rebound in demand for steel and copper, particularly in developed economies within the OECD (Organisation for Economic Co-operation and Development). However, Broken Hill Proprietary also cautioned that global trade tensions could pose risks to this recovery.

CEO Mike Henry also noted that BHP’s exposure to U.S. tariffs is minimal, as the U.S. market only accounts for around 3% of its total revenue. In terms of global trade, Henry acknowledged potential disruptions from Canadian potash exports to the U.S. but expected global markets to adjust accordingly. BHP is also anticipating its potash shipments to begin by the end of 2025.

Broken Hill Proprietary’s copper operations, however, were a bright spot in the company’s financials. Copper earnings soared by 44%, reaching $5 billion, bolstered by tight market conditions and continued strong demand, particularly from China. Stimulus measures and interest rate cuts have kept copper prices elevated. As a result, BHP plans to invest $4.7 billion in expanding its copper operations in fiscal 2025, with expectations to increase output by 24% or approximately 300,000 tonnes over the next three years.

Despite facing a challenging first half, Broken Hill Proprietary remains focused on organic growth and has ruled out any acquisitions for the time being, especially after its failed bid to acquire Anglo American last year. The company is committed to expanding its existing operations rather than pursuing large-scale acquisitions.

Looking ahead, BHP is optimistic about the broader global economy. Signs of recovery are emerging from China, the U.S. economy remains resilient, and India continues to see strong growth. While trade tensions and geopolitical risks remain a concern, BHP is positioning itself for a rebound in demand for its key commodities as global monetary policies continue to support economic growth.

In conclusion, Broken Hill Proprietary’s first-half results reflect a challenging economic environment, but the company remains confident that the combination of central bank rate cuts, strong demand for copper, and recovery in China will support future growth. With a strategic focus on organic growth and significant investments in copper, BHP is preparing for a more favorable economic outlook despite the uncertainties surrounding global trade.