Chanticleer
BHP’s reminder it’s not all woe in iron ore
BHP is taking its foot off the pedal in iron ore. It’s a reminder that the commodity’s price plunge doesn’t tell the whole story.
BHP’s September quarter numbers were largely in line with expectations, with long-planned maintenance weighing on production volumes.
Iron ore production was down slightly due to a combination of maintenance and train driver shortages. COVID-19 restrictions are biting across the Pilbara and labour is a source of cost inflation that may well prove stubborn.
Mike Henry is pushing on with his iron ore expansion. David Rowe
Two other nuggets suggest BHP’s view on iron ore is different to the tale of woe that has accompanied plummeting prices and China’s slowdown.
BHP said it received regulatory approval to increase capacity at its Port Hedland operations to 330 million tonnes in September, while last week the board approved a port debottlenecking program that will start in the coming months.
BHP reiterated its near-term target of lifting production from about 255 million tonnes in FY22 to 290 million tonnes in the near term, “with plans to creep beyond this through productivity in the medium term”.
With the life of the Yandi iron ore mine extended for a few years, and the new South Flank iron ore mine ramping up nicely, BHP clearly isn’t taking its foot off the pedal.
Which is a reminder that context is important when it comes to iron ore prices. Yes, the plunge from $US227 a tonne to $US124 a tonne isn’t pretty. But in the five years before COVID-19, prices above $US80 a tonne were the exception, not the rule. And at current levels, BHP appears keen to take advantage of what are still strong prices on a long-term view.
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