BHP Increases Focus on Copper as Quarterly Output Edges Up

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(Bloomberg) — BHP Group boosted output of copper — a key growth pillar for the world’s biggest miner — in its first quarter, while production of iron ore was steady.

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Copper production rose 4% in the three months to end-September from the year before, BHP said in its quarterly report Tuesday. That was mainly due to a ramp up at the massive Escondida project in Chile, which offset lower production from other mines.

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Amid growing bullishness, major mining companies are boosting efforts to increase their exposure to copper, prized for its role in renewable energy and data infrastructure. BHP’s own forecasts see global demand for the red metal soaring 70% by 2050. 

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BHP became the world’s biggest producer of copper over the past year at about 2 million tons per annum, increasing output from its existing operations in Chile and Australia. Boosting that production has been a key priority for Chief Executive Officer Mike Henry, who is in his sixth year in the top role.

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“In copper, major disruptions at some of our competitors’ mines have tightened overall market fundamentals, benefiting our world-class portfolio of assets,” Henry said in the report. “Overall, macro-economic signals for commodity demand remain resilient.” 

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Like peer Rio Tinto Group, BHP is rebalancing its portfolio with an increasing focus on copper, but iron ore still contributes more than half of its earnings.

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BHP has been in conflict over iron ore pricing with Beijing’s state buying representative China Mineral Resources Group Co., a dispute that may well drag into next year. So far, the company has faced little disruption in its iron ore shipments to China, as most of its November and December allocations have already been sold, according to people familiar with the matter.

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Output of iron ore was 0.1% lower from the year before at 64.1 million tons, BHP said. Guidance for the year to June 30 was unchanged at 258 million to 269 million tons. 

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After a year of resilience, iron ore prices may be nearing a downturn as global steel oversupply and sluggish Chinese demand weigh on sentiment. Some analysts see prices falling under $100 a ton next year. 

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Poorer Quality

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Australia’s iron ore miners are also contending with poorer ore quality and shrinking reserves, prompting a push for fresh developments. Undeterred, BHP is pressing ahead with plans to increase its iron ore output to 305 million tons a year within three years.

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BHP has long sought to enter the potash market but recently delayed expansion of its Jansen project after cost overruns and a well-supplied market. 

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Still, the company remains optimistic, viewing potash as a long-term opportunity similar to its iron ore business in scale and efficiency. It said on Tuesday that Jansen Stage 1 was now 73% complete, although it was reviewing when to bring it into production.

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(Updates with details throughout; Henry comment in fifth paragraph.)

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