CLYDE RUSSELL: China turns up the heat on BHP over iron ore profits

Launceston — Tucked away on p 38 of BHP Group's 39-page presentation of its latest results is as good an explanation as any about why China desperately wants to talk down the price of iron ore.

Under the somewhat bland title of "Key underlying Ebitda sensitivities", BHP reveals that every $1 change in the price of iron ore leads to a change of about $119m in the underlying earnings for the current fiscal half year ending June 30.

BHP, the world's biggest mining company and third-biggest producer of iron ore, supplied 129-million tonnes of the raw material used to make steel in its fiscal first half ended December 31. It expects to mine much the same volume in the current half.

Its average realised price per tonne of iron ore in the half ended December 31 was $113.54. That was down from $158.17 in the previous six-month period, but still resulted in the iron ore division reporting underlying earnings before interest, taxes, depreciation, and amortisation (Ebitda) of a somewhat less bland $11.15bn.

Iron ore prices have had a strong start to 2022, with the spot price for delivery to north China, as assessed by commodity price reporting agency Argus, hitting a high of $153.55 a tonne on February 10.