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MarketScreener Homepage  >  Equities  >  Australian Stock Exchange  >  BHP Group    BHP   AU000000BHP4

BHP GROUP

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BHP Sees Opportunities in Coking Coal, Challenges for Iron Ore Prices -- Commodity Comment

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08/18/2020 | 04:19am EDT

By Will Horner

 

BHP Group Ltd. left its guidance and production figures unchanged for all commodities as it reported fiscal 2020 results Tuesday. However, the world's largest listed miner by market value said it will seek to exit its thermal coal business to focus more on higher-quality coking coal, which is used in steelmaking.

The Melbourne-headquartered miner was also cautious on the outlook for the commodities it mines, saying that while the initial demand shock due to Covid-19 has likely passed, possible second waves provide a level of uncertainty for the year ahead.

Metallurgical & Energy Coal:

BHP said it will seek to focus on higher-quality coking coals and exit its thermal coal business. The miner's thermal coal activities have been a target of environmentalists concerned about BHP's contribution to climate change.

BHP said energy coal prices look challenging as the growth of coal power energy will be slower than global population growth. What's more, BHP expects coal power to lose out to renewable energy in both China and the rest of the world.

In contrast, while metallurgical coal prices fell sharply as Covid-19 sapped demand in China, BHP predicts a "sustained improvement in prices" in the second half of 2021.

"Over time, premium-quality coking coals are expected to be particularly advantaged given the drive by steelmakers to improve blast furnace productivity, partly to reduce emissions intensity," BHP said.

Iron Ore:

Iron ore prices have been rising since a mine dam collapse at Brumadinho, Brazil in 2019, with strong Chinese demand pushing prices to six-year highs. BHP said, however, that Chinese demand is likely to slow in the second half of 2020 as crude steel production, which uses iron ore, plateaus, while new supply of iron ore from West Africa is increasingly likely. Both factors would weigh on prices.

"This implies that it will be even more important to create competitive advantage and to grow value through driving exceptional operational performance," the miner said.

Copper:

BHP said the pandemic will delay an anticipated deficit in the copper market to the mid to late 2020s and that, in the longer term, demand will be solid and prices would rise thanks to declining copper grades, higher input costs, and a lack of new mine exploration.

 

Write to Will Horner at william.horner@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
BHP GROUP 0.34% 1608.8 Delayed Quote.-9.46%
BHP GROUP -1.32% 36 End-of-day quote.-7.50%
DOW JONES AFRICA TITANS 50 INDEX -0.14% 485.86 Delayed Quote.-9.41%
EURO / BRAZILIAN REAL (EUR/BRL) 0.81% 6.6639 Delayed Quote.46.71%
GOLD -0.20% 1901.174 Delayed Quote.25.56%
S&P AFRICA 40 INDEX -0.01% 160.77 Delayed Quote.-6.93%
SILVER -0.36% 24.5975 Delayed Quote.38.53%
WTI -2.04% 39.715 Delayed Quote.-33.87%
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Sales 2021 44 125 M - -
Net income 2021 10 319 M - -
Net Debt 2021 10 217 M - -
P/E ratio 2021 11,6x
Yield 2021 5,89%
Capitalization 120 B 120 B -
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Nbr of Employees 31 589
Free-Float 58,1%
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Number of Analysts 15
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