BHP profits take a hit as prices fall for Australia’s mining exports
By Nick Toscano
Mining giant BHP may be forced to rethink the future of some of its Australian mines as weaker Chinese demand and falling prices for coal and iron ore crushed its profit to its lowest mark since the COVID-19 crisis.
Melbourne-based BHP, the largest Australian miner, on Tuesday said its underlying profit had slid by more than a quarter to $US10.2 billion ($15.7 billion) in the year to June 30, its smallest profit since 2020. The result comes as US President Donald Trump’s trade wars continue to cast a cloud over the global economy and the outlook for Australia’s most lucrative mining exports.
BHP, the largest Australian mining company, earns most of its money from digging up iron ore in WA and selling it to China to be turned into steel.Credit:
BHP earns most of its money from digging up iron ore in Western Australia and selling it to China to be processed into steel. However, demand in China has been starting to cool as its property sector battles an oversupply crisis, which has crunched building activity, weakened steel production rates and subdued appetite for iron ore deliveries. The glut has also pummelled the price of BHP’s exports of metallurgical coal, which is used to fire steel-making furnaces.
Falling revenue across the year was “primarily due to the decline in coal and iron ore prices”, the miner said on Tuesday.
BHP warned one or more of its jointly owned Queensland coal mines may need to be suspended due to falling prices, unless the Queensland state government reconsidered what the mining sector has branded an “extreme” royalty regime.
“If low coal prices persist, options to pause lower-margin areas of our operational footprint will be considered.”
Despite the sharp decline in profit, BHP’s full-year result was in line with analysts’ expectations.
Shareholders would receive a final dividend worth US60¢ a share, taking BHP’s payout for the year to $US1.10 a share, the company said. While that’s better than analysts had expected, it’s the lowest full-year payout since the year ended June 2017.
The outlook for some of Australia’s largest mining companies has deteriorated since April, when the US government imposed across-the-board tariffs at much higher rates than many had been expecting, leading to increased uncertainty and lower global growth forecasts.
While Trump gave Australia the minimum baseline tariff rate of 10 per cent, the fallout for the nation is expected to be wider-reaching as the biggest Asian buyers of its natural resources, particularly China, face much higher US tariffs amid an already sluggish time for their economies.
Iron ore is Australia’s biggest commodity export, accounting for $116 billion of income in the past financial year.
Chief executive Mike Henry said BHP’s operations were performing “strongly and consistently … even in the face of a very uncertain and volatile external environment”.
The company described the economic outlook as “mixed” but pointed to resilient demand for commodities, particularly in China and India.
“Policy uncertainty, particularly around tariffs, fiscal policy, monetary easing and industrial policy, has been elevated and continues to influence investment and trade flows,” the company said. “Despite these dynamics, commodity demand remained resilient.”
BHP’s copper business was a standout in Tuesday’s results, as demand for the red metal had proved stronger than expected across the year, driving prices and earnings higher.
BHP has been pushing to boost its exposure to what it terms “future-facing” commodities, particularly copper, a material the world needs much more of as a critical building block for renewable energy, transmission lines and electric cars.
Copper accounted for 45 per cent of BHP’s underlying pre-tax earnings in the 12 months to June. The company said its copper production had increased 28 per cent over the past three years.
Analysts on Tuesday said BHP’s earnings slump highlighted the “strain across commodity markets”.
“Copper provided some relief with firmer prices, but it wasn’t enough to offset the broader commodity weakness,” eToro market analyst Farhan Badami said.
“The decline in iron ore and coal prices signals more than just market imbalances; it underscores the slowing economic momentum in major buyers like China.”
RBC Capital Markets analyst Kaan Peker said BHP’s “strong set of results” reflected the “consistency of the business”, while its better-than-expected dividend would be viewed favourably by investors.
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