The company was understandably reluctant to talk much about China when releasing its production report, but the message on coal is clear: the Chinese mills are looking elsewhere with Canada and the US filling the implicit cuts in Australian orders.
BHP took a $US1.3bn ($1.7bn) writedown on its NSW coal assets, which has cleared one of the hurdles against collapsing the dual-listed structure that recalcitrant shareholder Paul Singer from Elliott Management, among others, has urged.
The coal assets are now in the books at about $US300m.
Another hurdle to dropping the dual-listed structure, the Singapore tax rate is also effectively diminished so now the only thing stopping BHP chairman Ken MacKenzie from collapsing the artificial structure created in 2001 for the Billiton merger is shareholder support and how to treat franking credits on dividends for non-Australian shareholders.
MacKenzie is not sitting on much by way of franking credits today and next month is set to deliver shareholders a bumper dividend of 90c a share or more thanks to the China-led iron ore price.
Just whether he takes the next step and collapses the dual-listed structure is another thing, amid the COVID-19 fallout and poisonous relations between Australia and China.
China clearly wants to find a replacement for some of the iron ore it buys from Australia and analysts figure in a decade it could be getting as much as 300 million tonnes a year from Africa.
That comes directly from BHP, Rio Tinto and Fortescue and in turn tax revenue from Western Australia and Canberra.
The light is yet to go on in Canberra of that clear and present danger, but for those who have seen China build up its own supplies of bauxite and copper, it is close to reality.
The miners may well be best placed to make the most of the high iron ore prices now based on the expected one billion tonnes a year in steel production for the next decade or so, but the focus will be elsewhere, including outside the cash cow iron ore longer term in terms of expansion.
On February 18, the Australia China Business Council will hold its annual dinner at Sydney’s Fullerton Hotel with speakers including NSW Deputy Premier John Barilaro and new ACBC chief Russell Thomas.
Given much of the Australian business community is petrified to say anything publicly about China least it offends, it will be an interesting dinner.
This year’s ACBC gold sponsor is Bentley Motors, which in ACBC’s words will showcase “motoring luxury” at the event.
The federal government has not helped the China issue by throwing more fuel on the fire at each and every opportunity, as with this month’s decision by Josh Frydenberg to block the proposed sale of Probuild by its South African parent company to a Chinese entity.
As catastrophic as COVID-19 has been around the world in the view of some senior business people, the parlous state of China relations presents a greater risk for Australia.
This is underlined by the fact the Chinese economy grew by 2.3 per cent last year after 6.5 per cent growth in the fourth quarter and is tipped to grow by 8 per cent this year.
The US economy last year fell by 3.1 per cent and Europe by 7.4 per cent, highlighting the global strength of China.
While Australia cannot sell coal to China now, it is notable the gap is being filled by Canada and the US, even as the new Biden administration is expected to hold a tough line against President Xi Jinping.
The good news for now for BHP is it is flush with cash, its debt down $US4.1bn to $US12bn in the half, which will be reflected in a big boost in dividends with a buyback unlikely.
The dual-listed structure has long outlived its value and few within BHP today would lament its passing.
BHP boss Mike Henry passed some production milestones last half with the troubled Samarco mine in Brazil back in operation and production starting on the Chilean Spence copper project.
This year the company will finally make a decision on its Canadian potash mine, which is part of the Henry future.
Taking on Big Tech
In theory as regulators tighten their controls on the big digital platforms, competitors will emerge to fill the gaps and that’s precisely what Sydney-based software firm SafetyCulture is trying to do.
Last week Facebook’s WhatsApp delayed a presentation on its data policies amid increased US scrutiny, culminating in an antitrust action aimed at forcing the sale of the 2014 purchase.
The fear is company staff will be chatting away on work issues on WhatsApp, which will be shared throughout the Facebook network and privacy will be lost.
SafetyCulture’s Alistair Venn explains that where his software comes into its own, with iAuditor providing a safety audit that ensures work conversations are kept at the right levels.
The safety net means conversations among executives are kept at executive level without the danger of the contents being splashed around the internet via Facebook.
Companies can also keep track on who is taking part in the conversations.
Venn goes further to say the platform provides companies with scaleable safety.
Google’s threats to ban news in the run-up to passing of legislation for the media bargaining code will open the way forward for rivals such as Bing and DuckDuckGo.
Even China is joining the bandwagon with controls; on platforms like Alibaba. It has enjoyed an extraordinary level of access to consumer data through its ownership of everything from car operating systems to mobile phones, facial recognition software, loans, insurance and travel bookings.
But the Chinese government has now ruled a line in the sand.
China Skinny noted recently “The (Chinese government, courts, consumer associations and consumers themselves all seem to have gathered momentum in their quest against the tech gorillas.
“The China Consumers Association has released a 14-point document outlining how the tech giants algorithms ‘bully’ and impinge the rights of consumers.”
SafetyCulture has 26,000 business customers including mining giants BHP and Rio Tinto, Coles, the big hotel chains, and government departments like Transport NSW have signed up for its audit checklist software.
The more the behemoths are seen to be dangerous, the better it is for competitors to enter their space — that at least is the theory.
Media hearings
Friday’s Senate Committee hearings into the media bargaining code will start in the morning with Google, then Facebook followed by News Corp and other commercial media groups. ABC and SBS will start after lunch, followed by the ACCC, Communications Department and Treasury.
The public hearings are into the proposed bargaining code, which is expected to be approved by the Senate early this year.
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China looms large over BHP’s future in both the dividend boost it will provide thanks to the booming iron ore earnings in the short term and in the long term over just how sustainable those earnings are.