Key Points
- BHP has agreed to lower prices for some of its iron ore in negotiations with China.
- The company is in a protracted battle with China’s state-run buyer, CMRG.
- The cost of BHP’s Jansen potash project in Canada has jumped by 20% to $8.4 billion.
- BHP reported record-high iron ore production in the first half of the year. The company raised the bottom end of its copper production forecast.
Mining giant BHP has agreed to lower prices for some of its iron ore in its annual contract talks with China. The company made the rare admission on Tuesday as it reported record production of the key steelmaking ingredient in the first half of the year.
BHP is in the middle of protracted negotiations with China Mineral Resources Group (CMRG), the state-run buyer seeking a better deal for Chinese steel mills. The fight has been tough. Since September, CMRG has reportedly ordered Chinese companies to stop buying multiple types of BHP’s iron ore.
In a statement, BHP said it has been working during negotiations to find other markets for its products. However, it also acknowledged that the standoff “has seen some impact on realised price.” This is a significant concession from the world’s biggest listed miner, and its competitors will closely watch it.
While iron ore remains BHP’s biggest moneymaker, the company is also grappling with rising costs at its massive Jansen potash project in Canada. BHP said the total investment for the first stage of the project has now jumped to $8.4 billion, a 20% increase from its previous estimate.
On a more positive note, BHP reported record-high iron ore production from its Western Australia operations in the first half of the year. The company is on track to meet its full-year output forecast. It also raised the bottom end of its copper production forecast, thanks to strong performance at its copper mines.
BHP’s shares rose slightly on the news, as investors seemed more focused on the strong production numbers than on the tough negotiations in China.
