COVID-19 update
During the June 2020 quarter, our operated assets have continued with additional protocols in place to protect our workforce and communities from the spread of
COVID-19, in line with guidelines from local and federal government bodies and expert health advice in the geographies where we operate.
In Australia, we have only had a small number of cases among our workforce since COVID-19 began, none with workplace
exposure, and some assets are returning to more normal rosters. We remain vigilant and will continue with social distancing and hygiene practices and other protocols as appropriate to minimise the risk of transmission.
In South America, COVID-19 infection rates have seen governments continue with travel and lockdown restrictions. We
continue to operate with a reduced number of people at mine sites and other operational facilities, with only business critical personnel on site. We have implemented a comprehensive plan for COVID-19
including various hygiene and health controls and a proactive testing regime for people before entering sites and boarding transportation.
In addition,
we have implemented a company-wide COVID-19 app for employees and contractors so that in the event of a positive result, movement on site can be tracked to trace others who may have been in contact, and
targeted isolation and sanitation can be undertaken. Medical and wellbeing support is in place for the workforce.
Our supply chains remain open and we
have adequate supplies to operate and maintain critical equipment, with alternative suppliers identified for many of these.
Marketing
update(2)
Short term economic outlook
The global economy has been dramatically impacted by COVID-19. Many major economies contracted heavily in the June 2020
quarter, including the United States (US), Europe and India. In contrast, China has moved from intensive viral suppression to economic recovery. Much of the developing world is still in the escalation phase of their COVID-19 outbreaks. The developed
world has begun to re-emerge from wave one lockdowns, but early indications are that there is likely to be a period of uncertainty, with re-escalation of infection rates
and re-implementation of COVID-19 response measures in some jurisdictions.
The pace and scope of recovery will vary across countries. Where hibernation policies(3) have
been enacted, we anticipate a smoother resumption of activity after the first wave. A considerable amount of monetary, liquidity and fiscal policy support has been mobilised in response to COVID-19. It is
still uncertain how significant the multiplier effect will be of the monetary and fiscal stimulus policies measures that have been taken. A lower multiplier could result from depressed consumer and business confidence due to the impact of COVID-19 on both jobs and profitability. A higher multiplier could occur if the lagged impact of stimulus coincides with the release of pent-up demand as economies emerge from
the lockdown, with the caveat that major second waves do not occur.
The International Monetary Funds (IMF) latest forecasts predict that the world
economy will contract by 4.9 per cent in the 2020 calendar year and rebound by 5.4 per cent in the 2021 calendar year. While we plan against a range, our base case is similar across the two years. If this case eventuated, the world economy
would be around 6 per cent smaller, on average, in the 2021 calendar year than it would otherwise have been if COVID-19 had not occurred.
Regionally, we note that Chinese domestic industrial activity has been improving, spurred on by supportive credit and fiscal policy. The major risk to
maintaining that positive trajectory is the possibility of a widespread second wave of infections emerging. That is among the range of pathways that we consider and it is the key uncertainty in each of our regional outlooks. Elsewhere, indications
are that the US, India, Japan and Europe will all experience a flatter recovery trajectory than China. Negative feedback loops to China from the downturn in the rest of the world are factored in to our range analysis.
Short term commodities outlook
Exchange traded commodity
prices have recovered slightly from their March/April 2020 lows. Bulk commodity prices have diverged, with iron ore higher than in April 2020 while metallurgical coal prices are lower. Across the suite of commodities, a combination of economic
supply-side curtailments and COVID-19 induced supply-side disruptions have served as a partial offset to the lower demand.
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BHP Operational Review for the year ended 30 June 2020
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