China is Starting to Stand Again in the Commodity Sector After Facing Economic Headwinds

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BHP, an Australian multinational mining company, posted a surprising amount of quarterly iron ore shipments on January 12. Together with that, they announced that China is starting to regain its power in the commodity sector after facing economic headwinds. 

“China’s pro-growth policies, including in the property sector, and an easing of Covid-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half,” BHP said.

BHP anticipates that China’s actions to boost its real estate market will promote a substantial demand for its steel-making products.

Rio Tinto also emphasised in the same week that China’s decision to loosen their restrictions on Covid -19 could lead to shortages in supply-chain and labour.

The largest publicly traded miner in the world said that for the three months that ended in December, its Western Australian operations produced 74.3 million tons of iron ore, 1 per cent more than forecast (71.9 million tons).

BHP’s financial forecast for Western Australian ore this 2023 is expected to reach an output of 278 million tons to 290 million tons.

David Lennox of Fat Prophets in Sydney noted, “It’s a pretty solid result. Pricing we expected would be weaker in the half, costs we expected would be higher, but in the second half may be some relief.”

BHP updated its cost projections for its coal operations. The company said that floods and inflation made its refusal to invest in Queensland clear after it increased state royalties.

“We see strong long-term demand from global steelmakers for Queensland’s high-quality metallurgical coal; however, in the absence of government policy that is both competitive and predictable, we are unable to make significant new investments in Queensland.”

BHP reported an increase in the unit cost projection for the coal-mining joint venture BHP Mitsubishi Alliance to between $100 and $105 per ton and the New South Wales energy coal division to between $84 and $91 per ton.

Road blockades that hampered the flow of supplies interfered with production at the Chilean copper mine Escondida.

After completing smelter maintenance, the Olympic Dam copper operation’s production more than doubled, and preparations were started to acquire Oz Minerals nearby.

Due to a longer-than-anticipated ramp-up after planned maintenance in the December quarter, nickel output decreased by 2%.

Shares climbed 0.3% to close at 49.40 Australian dollars each.

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