BHP boss Mike Henry says he doesn’t expect global energy crisis to affect growth
BHP copped a climate backlash at its AGM, but chief executive Mike Henry is still bullish on global economic growth.
BHP chief executive Mike Henry says he is not concerned that the energy crisis in Europe and China will crimp global economic growth in the near term, saying the big miner still sees a strong outlook for the global economy in the near term.
Speaking after the company’s annual shareholder meeting on Thursday, Mr Henry said the “perturbations” in energy markets were impacting inflationary pressures in the short term, but he did not believe there would be a longer-term implication for economic growth across the world.
“Of course with high energy prices we’re seeing some inflation,” he said.
“But that hasn’t changed our very positive outlook for global economic growth. Our medium-term outlook for the recovery from Covid-19 is still for strong economic growth.”
And, while Mr Henry would not be drawn on the short-term outlook for iron ore prices, he said he was not concerned by the sharp tumble in the price of the steelmaking commodity in recent months.
Iron ore futures traded on the Singapore exchange recovered slightly on Thursday, trading at $US92.20 a tonne last night after hitting a low of $US87.87 on Wednesday.
Spot iron ore prices were trading at about $US92 a tonne on Tuesday, according to FastMarkets data.
Iron ore is now trading more than 60 per cent below record highs of around $US237 a tonne in May, as China curtails steel mills and concerns grow around the country’s construction industry.
But Mr Henry said that even after the sharp falls iron ore was still trading at high levels compared to historical averages, and it was clear Chinese demand was still strong.
“The Chinese steel industry will produce a billion tonnes of steel for the second year running, and our outlook for the Chinese economy does remain very positive,” he said.
Almost 13 per cent of BHP shareholders voted against the company’s carbon reduction action plan, after the resources major put its climate transition plan to an Australia-first shareholder vote.
The result, based on proxy votes of BHP shareholders cast ahead of the meeting, came after chairman Ken MacKenzie faced a raft of questions from shareholders at the company’s AGM over its approach to reducing emissions, and in particular its support for the development of the Scarborough gas project in Western Australia.
BHP’s goal of reducing its own carbon footprint by 30 per cent by 2030 has now been eclipsed by those of its major rivals, with Rio Tinto targeting a 50 per cent reduction by the same date.
Glencore, the world’s biggest coal producer, has set a 2035 target for halving its carbon emissions, and Fortescue Metals has set the most ambitious target of all, saying its operations will have net zero emissions by 2030.
Mr MacKenzie defended BHP’s targets, saying the mining giant had set reduction targets that were appropriate for its own commodity mix.
“It’s great to see others joining with us in that ambition. But the portfolios are different,” he said.
“In the case of Rio, just to give some perspective, the scale of the challenge for Rio is that even after it achieves its operational emissions targets – and we all hope they do – their emissions in 2030 will be about the same as BHP today, and about 50 per cent above where BHP expects to be 2030.”
But environment groups said BHP needed to do more to improve its emissions targets.
Dan Gocher, director of climate & environment at the Australasian Centre for Corporate Responsibility (ACCR), said the vote represented a strong message to the BHP board.
“Given BHP would have been expecting shareholder support to exceed 95 per cent, this level of opposition demonstrates that a significant number of shareholders expect BHP to go further,” he said.
“This is the lowest ‘say on climate’ vote globally since the mechanism was introduced earlier this year.
“Even still, it is disappointing to see investors fail to match their words at COP26 with action. This vote suggests institutional investors are easily cowed by big companies like BHP and they’re unwilling to force them to adhere to the Paris Agreement.”
Mr Henry stamped his mark on the future of BHP when delivering the company’s annual results. In addition to handing record dividends back to shareholders, he ended weeks of speculation by announcing a deal to merge its petroleum division with ASX-listed Woodside Petroleum.
In a flurry of announcements to coincide with BHP’s annual results release, Mr Henry launched a radical reshaping of the company’s structure and commodity focus – with BHP to exit petroleum, enter the potash market and unify its dual-listed corporate structure.
BHP paid a record $US2 a share dividend on the back of an $US11.3bn ($15.5bn) net profit for the full year, taking its total return to shareholders to $US15bn for the full year.
Mr Henry also announced the approval of the $US5.7bn construction of the first stage of its Jansen potash project in Canada.
BHP is still to release the full details of the petroleum division merger plans with Woodside, but Mr MacKenzie told shareholders the surprise downgrades in the reserves of Woodside would have no impact on negotiations over the terms of the deal.
“We’ve done our own due diligence on the Woodside business, the downgrade doesn’t change our assessment of, or appetite for, the merger,” he said.
“And the reserves are only one of many factors that go to the valuation and merger ratio. So we’re comfortable.”
BHP shares closed Thursday at $36.66, up 92c or 2.6 per cent.
More Coverage
