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BHP joins Rio in warning of tougher times to come for mining sector

BHP joined Rio Tinto in warning of tougher times to come for the mining sector owing to rising inflation and the impact on demand as a result of the…

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This article was originally published by Miningmx

BHP joined Rio Tinto in warning of tougher times to come for the mining sector owing to rising inflation and the impact on demand as a result of the war in Ukraine and Europe’s energy crisis.

Citing comments in BHP’s second quarter production update, Bloomberg News said there was an “overall slowing of global growth”. Cost pressures would also linger over the next 12 months, the newswire quoted BHP CEO Mike Henry as saying.

“We expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints,” Henry said.

While profitability is still strong, both miners “… are trying to prepare the market in case we see a significant slowdown in Chinese demand,” Gavin Wendt, a senior resource analyst at MineLife told the newswire. “The tougher conditions are coming at a time when prices they’re receiving from commodities are easing, putting pressure on margins.”

Unlike previous cycles, however, mining companies were in a better place to survive a downturn. “There’s definitely been more uncertainty seen in some time and that’s been reflected in the outlook” provided by BHP and Rio, said David Radclyffe, senior mining analyst at Global Mining Research. Still, he added “their balance sheets have never been so good; they’re well-placed” to weather the downturn”.

BHP’s shipments of iron ore from Western Australia’s Pilbara region reached 72.8 million tons in the three months ended June 30, down 1.2% from a year earlier and up 8.5% from the previous quarter, which was impacted by Covid-19 disruptions. That compares with a median estimate from three analysts of 73.1Mt, said Bloomberg News.

The post BHP joins Rio in warning of tougher times to come for mining sector appeared first on Miningmx.

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