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BHP More Bullish on Electric-Vehicle Revolution

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05/20/2019 | 10:15pm EDT

By Rhiannon Hoyle

SYDNEY--BHP Group Ltd. (BHP.AU) sounded an increasingly confident tone on the electric-vehicle revolution, a forecast that will help to shape the miner's investment in commodities including copper and oil.

The world's biggest miner by market value on Tuesday raised its expectations for the number of electric vehicles that it expects on the roads in coming decades, citing declining battery costs and rising interest among automakers, particularly in China.

"Globally established automakers and China's up-and-coming indigenous firms are embracing EVs, with model availability increasing steadily and many self-imposed sales targets instituted," said BHP's chief economist, Huw McKay.

BHP said it now expects electric vehicles to account for at least 7% of the light-vehicle market come 2035, up from a forecast of at least 5% two years ago. That is equal to 132 million electric vehicles on the road at that time, it said.

The miner thinks market share could swell as high as 36% should more governments invest in infrastructure to support charging and ban the sale of cars powered by traditional internal-combustion engines. BHP said its forecasts include wholly battery powered and plug-in hybrid vehicles, but not traditional hybrids such as the Toyota Prius.

Electric vehicles have faced some speed bumps recently as China, the world's largest car market, has cut subsidies. Umicore--which makes cathodes used in electric-car batteries--issued a profit warning and pushed back targets for sales and plant investments, citing slowing Chinese demand.

Still, countries and cities elsewhere--particularly in Europe--are pressing for change by announcing bans or restrictions on diesel and gasoline vehicles.

Mr. McKay called electric vehicles "one of the mega-trends expected to shape our long run operating environment."

BHP's electric-vehicle forecasts are "essential to establishing the plausibility of our long run copper, nickel, oil and power demand ranges" and consequently making decisions on future investments, said Mr. McKay.

Last week, the mining company said it no longer plans to sell a large nickel-mining and processing business in Australia because of growing optimism over the use of nickel in batteries for electric vehicles.

A strong electric-vehicle boom would be particularly positive for BHP's copper business. Electric vehicles use up to four times as much copper as other cars.

BHP has in recent years shifted its focus to producing more copper, away from steelmaking materials iron ore and coal, because of expectations demand for consumer products, including electric vehicles, would lead the next commodity boom.

It has also focused on investments in petroleum, which could be hurt by stronger-than-expected electric vehicle sales. The first 100 million electric vehicles on the road will likely reduce global oil demand by 1.3 million barrels per day, said Mr. McKay. World demand currently stands around 100 million barrels a day.

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

Stocks mentioned in the article
ChangeLast1st jan.
BHP GROUP LTD -0.32% 40.85 End-of-day quote.19.72%
BHP GROUP PLC 1.23% 1946.5 Delayed Quote.16.51%
LME COPPER CASH 0.80% 5895 End-of-day quote.0.96%
VALUE8 -1.43% 5.6 Delayed Quote.18.14%
WTI 1.28% 55.33 Delayed Quote.14.21%
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Financials ($)
Sales 2019 44 251 M
EBIT 2019 17 384 M
Net income 2019 9 748 M
Debt 2019 9 447 M
Yield 2019 8,08%
P/E ratio 2019 13,79
P/E ratio 2020 11,91
EV / Sales 2019 3,09x
EV / Sales 2020 2,91x
Capitalization 127 B
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Technical analysis trends BHP GROUP LTD
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Income Statement Evolution
Mean consensus HOLD
Number of Analysts 15
Average target price 27,9 $
Spread / Average Target 5,2%
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Andrew Mackenzie CEO & Non-Independent Executive Director
John Kenneth Norman MacKenzie Chairman
Daniel Malchuk President-Americas Minerals Operations
Steve Pastor President-Petroleum Operations
Mike Henry President-Minerals Australia Operations
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