BHP CEO Mike Henry plays down return to trade’s glory days after US-China tariff truce

BHP and Rio Tinto agree that China is showing real confidence despite the trade war with the US. Mike Henry described a future where the trade partners flip-flop between tariffs and counter-tariffs.

Rio Tinto CEO Jakob Stausholm. Picture: John Feder/The Australian.

BHP chief executive Mike Henry says it is unrealistic to expect some “grand bargain” between Donald Trump’s White House and China that leads to a resurgence in free and open trade.

A more likely outcome was simply ongoing tariffs hedged by bilateral trade agreements, he predicted.

He warned the most damaging scenario was still an escalating global trade war involving tariffs and counter-tariffs, and noted how the world had been trending towards curbs on free trade, even before Mr Trump’s return to power.

“That would slow global growth for the remainder of this decade and beyond,” Mr Henry said at a Bank of America conference in Barcelona on Tuesday.

“The other bookend, of course, is that there’s some grand bargain in the offing here, and that, against the backdrop of everything that we’ve seen fail in the near term – there’s a realisation, or a resurgence in the realisation of the importance of free and open trade.

“I have to say that scenario feels pretty far-fetched at the ­moment. I think the reality is that it’s going to land somewhere in between.”

Mr Henry spoke immediately after Rio Tinto chief executive Jakob Stausholm told the audience that, whether they liked it or not, the US would need to import a lot of minerals.

“I think the US and the US government is very ambitious about creating more economic activity … and for that they need a lot of materials,” Mr Stausholm said. “We have a big footprint in the US with mines and processing plants, and those assets are more important than ever for the US and are being prioritised.”

BHP CEO Mike Henry.

Both Mr Henry and Mr Stausholm said they had noticed a quiet confidence on recent visits to China, the world’s second-biggest economy.

Mr Stausholm said the Chinese economy appeared in much better shape than it was a year ago, and that there was more self-confidence borne out of China’s success in responding to the energy transition.

Asked about feedback from customers of its iron ore and other commodities, Mr Henry said that, despite the global uncertainty, demand had held up well, echoing the confidence on China’s part. He said a year earlier it had felt like China was “selling a little bit too hard” that it had things under control.

“There was real confidence there, and they were able to talk fluently about some of the green shoots they’re seeing, and those aligned with what we’ve been seeing by way of demand for iron ore, demand for copper and so on,” he said.

Mr Henry tempered his comments by warning that the situation would become more complex and challenging if the trade war escalated.

Mining stocks have surged on the back of the 90-day truce between the world’s two largest economies, but analysts warn the Trump administration’s next move is hard to predict.

In the interim, tariffs of 145 per cent on Chinese goods entering the US and 125 per cent on US goods entering China have been set aside.

Both BHP and Rio closed up more than 2 per cent in trading on the ASX on Tuesday.

Mr Henry and Mr Stausholm were bullish about the West Australian iron ore mines that provide the lion’s share of earnings for their companies.

However, Mr Stausholm’s comments on the state of lithium signalled more pain for the struggling industry in Australia.

He said Latin America, where the focus is on brine production, was the right place for the world to source its lithium and the right place for miners to get to the bottom of the cost curve. WA lithium is mined from rock, which is more expensive. Rio is focused on developing its Rincon lithium mine in the Andes and other brine projects it picked up in the $US6.7bn ­acquisition of Arcadium Lithium earlier this year.

Originally published as BHP CEO Mike Henry plays down return to trade’s glory days after US-China tariff truce