BHP remain positive on the price of iron ore

BHP is looking on the bright side despite the relatively low price of iron ore. The price of iron ore has fallen dramatically since July after the Chinese government decided to release some of its strategic reserves. Not only that, the China and Australia-related trade tensions meant that Australia lost one of its largest customers who consume the base metal.

Speaking at the Financial Times Mining Summit BHP chief executive officer Mike Henry said that “If we take a step back if you look at overall Chinese policy, it remains pro-growth,”

He added “That is being disrupted somewhat by sector-specific measures in the near term, but end-use demand into machinery, consumer goods, exports, and so on remains reasonably strong. We expect that will continue to be the case into the calendar year 2022.”

Speaking about housing he said “I use the housing industry as one example. On the one hand, we are seeing pressure on housing starts, which will then impact on near-term steel demand,” he said. “On the other hand, activity on work underway remains very strong, and we are starting to see the pull-through to housing completions, which of course is going to bode well for copper demand.”

The company remains positive about the relationship between China and Australia. On the subject, he said, “Our long-term outlook for China, with continuing strong growth there, has not really changed,”. Adding “The big-picture outlook for commodities remains really healthy both in China and globally, where we are starting to see a bit of a pick-up in inflation, as well, which has been spoken about.

He also said, “Resources companies like BHP are right at the front end of that, and we are benefiting from that through prices for pretty much all of our commodities at this point.”

Mining companies concerned about the continued instability between the two nations must remain vigilant, Henry says, and continue communicating with their Chinese allies.

“In the near term, we need to ensure that we are doubling down on our engagement with our counterparts in China, both customers and suppliers, and looking at how we can collaborate ever more strongly.”

China has recently started talking to the Biden administration in the U.S. and the signs are looking positive that the economic powerhouse looks open to negotiate on trade. Any deal with the U.S. could help Chinese-Australian relations and in time trade could move back to normal.