BHP Sees Opportunities in Coking Coal, Challenges for Iron Ore Prices -- Commodity Comment
August 18 2020 - 6:34AM
Dow Jones News
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
(END) Dow Jones Newswires
August 18, 2020 06:19 ET (10:19 GMT)
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