BHP meets iron ore production targets despite fall in petroleum demand

Mining group BHP says it has met its production targets for the financial year despite demand falling due to the coronavirus pandemic.

Major mining group BHP says production levels are beginning to recover from the economic shocks caused by the coronavirus pandemic.

In an operational update lodged to the Australian Stock Exchange on Tuesday morning, the company noted it had met full-year production targets for iron ore, metallurgical coal and its copper and thermal coal assets.

The company said petroleum and gas production was lower than expected during the COVID-induced economic downturn, fuelled by reduced gas demand in the June quarter.

“We expect to continue to generate solid cash flow through the cycle and we remain confident in the outlook for demand for our products over the medium to long term,” BHP chief executive Mike Henry said.

In its update, BHP said the financial costs associated with the pandemic were expected to be up to $US150 million for the second half of the 2020 financial year, stemming from the market plunge and imposed lockdown measures around the globe.

The company said its economic predictions where in line with the International Monetary Fund’s forecasts of a global economic contraction of 4.9 per cent in the 2020 calendar year. BHP is expecting the world economy to be 6 per cent smaller in 2021 calendar year.

It also noted operational levels would be affected by government “hibernation policies” and how smooth economic recovery efforts would be after COVID-19.

BHP says iron ore production levels have increased 11 per cent for the June quarter.

“It is still uncertain how significant the multiplier effect will be of the monetary and fiscal stimulus policies measures that have been taken,” BHP said.

“A lower multiplier could result from depressed consumer and business confidence due to the impact of COVID-19 on both jobs and profitability.”

BHP noted Australia’s ability to contain the spread of the virus had resulted in a faster return to production levels, however its South American operations continued to experience reduced working capacity from government restrictions.

Iron ore production levels for the June quarter stood at 67 megatonnes, an 11 per cent increase compared to the previous corresponding quarter.

For the 2020 financial year, BHP’s iron ore production was 248 megatonnes, a 4 per cent increase compared to the 2019 financial year.

BHP said it expects the global economy to be 6 per cent smaller. Picture: David Mariuz/ AAP

The miner produced 12 megatonnes of metallurgical coal, a 26 per cent rise on the third quarter.

BHP said the increase was due to higher levels at Queensland Coal, which included record productions levels at Broadmeadow, Caval Ridge and Poitrel sites.

The group noted increased petroleum at Bass Strait helped produce quarterly growth of 5 per cent, or 26 million barrels of oil.

However, lower demand globally meant production levels for 2020 fell 10 per cent compared to the previous financial year.

Thermal coal production is down 16 per cent compared to the 2019 financial year, while Nickel production levels are down 8 per cent over the same period.

BHP’s copper production for the June quarter declined 3 per cent, but remain 2 per cent above the end of financial year levels experienced in 2019.