By Nick Toscano
BHP, the largest Australian mining company, has slashed its interim dividend to an eight-year low amid a slowdown in Chinese demand for iron ore shipments and the threat of fresh trade tensions looming over economies across the globe.
Melbourne-based BHP on Tuesday said its underlying profit had plunged more than 20 per cent to $US5.08 billion ($8 billion) in the six months to December 31, reflecting declines in the prices it earned from selling iron ore and coking coal to the steel-making industry.
BHP’s half-year underlying profit was lower than most market analysts had been expecting.Credit: Tony McDonough
Shareholders would receive a US50¢ (79¢) half-year dividend on March 27, BHP said, which was down 30 per cent on the same time a year earlier. It is also the minimum payable under the miner’s policy of returning at least 50 per cent of underlying earnings.
For years, booming demand from Chinese steel mills, which process iron ore in steel-making furnaces to churn out molten pig iron, have delivered mega profits for Australian miners BHP, Rio Tinto and Fortescue, and cemented iron ore’s position as the nation’s most lucrative export.
But weakening economic activity in China over the past 12 months and a housing oversupply roiling its construction sector, which accounts for 30 per cent of its steel demand, have triggered a slowdown.
Analysts, meanwhile, have flagged that “testing times” appear likely to continue for iron ore miners in 2025 amid doubts over the effectiveness of Chinese stimulus measures to counter the downturn, and the uncertain impact that US President Donald Trump’s tariffs could have on economic growth in China and elsewhere.
BHP chief executive Mike Henry on Tuesday said commodity demand had been “soft” throughout 2024, but sounded an upbeat tone as he pointed to early signs of recovery in China’s property sector for the first time since 2021.
“What we are now seeing play out is a stabilisation, at a low level, of the property sector, with some green shoots in terms of new home sales and pricing in some markets,” he said.
“We can see momentum starting to build into 2026.”
He also pointed to the relatively strong prices and bright demand outlook for copper, which is essential to hastening global electrification and decarbonisation efforts, and sits at the heart of BHP’s growth strategy.
While BHP still earns most of its money from its massive iron ore mines in Western Australia, Henry has been spearheading a push to boost BHP’s exposure to what he terms “future-facing” commodities. Copper will be needed in vastly greater quantities in the coming years to build transmission lines, renewable energy infrastructure and electric vehicles.
Last year, BHP made repeated attempts to take over London-listed rival Anglo American, which it had targeted largely for its extensive ownership of copper mines. After its $US49 billion ($77 billion) offer was rebuffed, BHP walked away from the proposal and embarked on plans to expand its South American copper presence under a deal with Canada’s Lundin Mining to acquire a 50 per cent stake in junior copper miner Filo Corp.
BHP’s accounts on Tuesday showed copper accounted for more than 40 per cent of BHP’s underlying earnings for the half-year period.
Morgans analyst Adrian Prendergast said copper’s share of BHP’s earnings before interest, tax, depreciation and amortisation had increased from 25 per cent to 39 per cent from the same time a year earlier, “helped by stronger pricing”.
Escondida, BHP’s jointly owned copper mine in Chile, had done a “lot of the heavy lifting”, he added.
Barrenjoey analyst Glyn Lawcock said BHP’s half-year earnings had landed slightly above market expectations, boosted by a 2 per cent beat in the copper division due to lower-than-expected costs at Escondida.
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