BHP Group Ltd. on Tuesday reported a jump in full-year profit, reflecting the sale of its petroleum business and strong commodity prices. Here are some remarks from its year-end report.


On steel:

"The global steel market opened the second half of the 2022 financial year strongly, both in China and the rest of the world [ROW], but momentum began to fade as the period came to a close. While a steady improvement in end-use demand from China is anticipated, the slower than expected rebound in construction post Covid-19 lockdowns has dampened sentiment across the steel value chain. In the ROW, strong profitability for steelmakers in the March 2022 quarter had declined by the end of the June quarter, as end-use demand softened amidst high input costs. ROW steel markets are expected to remain under pressure in the 2023 financial year as the macroeconomic climate softens."


On iron ore:

"The iron-ore market was firm for much of the second half of the 2022 financial year, supported by resilient demand, constrained supply of competing scrap in China, and lower than expected seaborne supply from some of the low-cost and swing producers. As a result, Chinese port stocks declined steadily for much of the period. Lower prices for iron ore towards the end of the 2022 financial year reflected weakening sentiment in the steel value chain. Looking ahead, the key near-term uncertainties are the pace of steel end-use demand recovery in China, how the Chinese authorities will administer production cuts in the remainder of the 2022 calendar year to meet the annual zero-growth mandate, and the performance of seaborne supply."


On steelmaking coal:

"Metallurgical coal prices surged to record highs in the second half of the 2022 financial year on firm ROW demand, uncertainty over Russia and multi-regional supply disruptions. The deterioration in ROW steelmaking profitability late in the June quarter saw prices descend from their highs. The industry faces an uncertain outlook while natural trade flows are impaired, including China's import policy and Russian coal supply. Additionally, the major seaborne supply region of Queensland has become less conducive to long-life capital investment as a result of changes to the royalty regime."


On thermal coal:

"Energy coal prices reached record highs in May 2022 amid very strong demand and constrained supply. Trade flow redirection from Asia to Europe due to the Russian invasion of Ukraine, gas-to-coal switching as LNG [liquefied natural gas] prices spiked upwards, and hot weather in major importing regions, all contributed to the swift increase in pricing. Longer term, total primary energy derived from coal (power and non-power) is expected to be challenged, particularly under deep decarbonization scenarios where demand is expected to decline."


On copper:

"Copper prices spent much of the 2022 financial year trading around historic highs, buoyed by robust demand, low visible inventories, project delays and Russian supply risks. However, prices fell in two stages in the June quarter. The first decline was due to the demand impact of China's Covid-19 lockdowns. The second was due to recession speculation in advanced economies. We believe mine supply and scrap collection will grow in the next few years, covering near-term demand growth. Longer term, traditional end-use demand is expected to be solid, while the electrification mega-trend offers attractive upside."


On nickel:

"The nickel market was in deficit across the 2021 calendar year and early calendar year 2022. Visible inventories were drawn down steeply, putting upward pressure on prices. These tight fundamentals emerged due to a combination of strong demand from conventional end-use sectors, rapid growth in the electric vehicle value chain, uncertainty over Russia, and constrained Class-1 supply in the 2021 calendar year. These forces culminated in a dramatic spike in LME prices in March 2022. Prices have since fallen back to levels before the Russian invasion of Ukraine due to recession fears, alongside other exchange-traded commodities."


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


(END) Dow Jones Newswires

08-15-22 2206ET