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Mining giant BHP says commodity demand is still relatively robust in China and India, but a slowdown in global economies is hitting iron ore prices as high inflation digs into its revenue.
Australia’s largest miner reported a 37 per cent slump in full-year underlying attributable profit to $US13.4 billion ($20.9 billion). Full-year revenue was down $US11.3 billion, primarily from falling iron ore, metallurgical coal and copper prices.
Inflation and slowing global growth is weighing on iron ore prices.Credit: Michele Mossop
“Commodity demand has remained relatively robust in China and India even as developed world economies have slowed substantially,” chief executive Mike Henry said.
China’s growth trajectory is contingent on Beijing’s policy response as it grapples with an unfolding property crisis, but India’s buoyant construction activity was underpinning an expansion in steelmaking capacity, Henry suggested.
“Our financial results for the year were strong, underpinned by reliable production together with capital and cost discipline as we managed lower commodity prices and inflationary pressures,” he said.
China’s slumping property market has intensified concerns about demand for iron ore, Australia’s largest and most lucrative export which added $41 billion to federal government taxes last year and this year underpinned Treasurer Jim Chalmer’s $4.2 billion budget surplus.
BHP’s end of financial year production update last month revealed its annual production of iron ore from its Western Australia’s Pilbara reached a record 285 million tonnes, with more copper and gold production coming online at its underperforming Olympic Dam mine.
Iron ore prices fell during the June quarter, as falling demand from China’s steel mills – the world’s biggest producers – resulted in slower-than-expected global growth. After peaking at more than $US120 ($175) a tonne in March, it bottomed out at around $US98 ($143) in late May.
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