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Mining giant BHP Group has joined rival Rio Tinto Group in signalling more turbulence to come for commodities producers as costs balloon and demand for everything from iron ore to copper hits headwinds.
The world’s biggest miner warned yesterday of an “overall slowing of global growth” amid war in Ukraine, Europe’s energy crisis and global monetary tightening.
The commentary — from its latest quarterly output update — echoed remarks from Rio last week. BHP also said cost pressures would linger over the coming 12 months.
While profitability is still strong, both miners “are trying to prepare the market in case we see a significant slowdown in Chinese demand,” Gavin Wendt, a senior resource analyst at MineLife said by phone.
“The tougher conditions are coming at a time when prices they’re receiving from commodities are easing, putting pressure on margins.”
Commodities prices have slumped in recent months as demand wavers in China and forecasts multiply for recessions across developed economies.
Iron ore, the biggest earner for both companies, plunged below US$100 a ton last week as China tackled fresh turmoil in its beleaguered property market, including a wave of homebuyer boycotts of mortgage payments.
At the same time, miners face rising costs. “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 chief executive officer Mike Henry said in the statement. — Bloomberg.
Online Reporter