Costs rise amid eye-watering earnings for BHP coal

The costs of producing coking coal in Queensland lifted 8 per cent last year for BHP, with further increases forecast this financial year as higher diesel and electricity prices bite. But soaring coal prices saw the big miner declare an EBITDA of $13.5 billion ($US9.5 billion) across its coal operations for the 2022 financial year - a lift of more than $13 billion (US$9.2 billion). The EBITDA for the BHP Mitsubishi Alliance operations in Queensland's Bowen Basin alone hit $9 billion ($US6.335 billion). In the bigger picture, BHP global operations delivered record underlying earnings of about $58 billion (US$40.6 billion) and the company will pay a record dividend to shareholders. In its full-year report released today, BHP said BMA unit costs had increased by 8 per cent last year to $126.85 ($US89) per tonne primarily due to lower volumes following significant wet weather impacts across most BMA operations, higher diesel and electricity prices, and labour constraints. This included COVID-19 related absenteeism which impacted stripping and mine productivity, the company said. Unit costs this financial year are expected to rise to $US90-$100 per tonne - about $128-$142.5 Australian - as a result of continued higher diesel and electricity prices. "We remain focused on cost reduction and productivity initiatives, however given the ongoing uncertainty regarding restrictions on coal imports into China and the announcement of the change to the Queensland royalty regime, we are unable to provide medium-term volume and unit cost guidance," the company reported. "We are preserving low-cost incremental growth optionality in our portfolio with a focus on higherquality coking coals. "COVID-19 cases have peaked in Queensland and are now trending down. Our current controls are continuously assessed to ensure our people remain safe and impact to operations is minimised." While metallurgical coal prices surged to record highs in the second half of the 2022 financial year, BHP believes the industry faces an uncertain outlook while natural trade flows are impaired, including China’s import policy and Russian coal supply. "Additionally, the major seaborne supply region of Queensland has become less conducive to long-life capital investment as a result of changes to the royalty regime," the company stated. "Long term, we believe that higher quality metallurgical coals will still be used in blast furnace steel making for decades based on our bottom-up analysis of likely regional steel decarbonisation pathways, as discussed in our Climate Transition Action Plan (CTAP). "Demand for seaborne hard coking coals is expected to expand alongside the growth of the steel industry in hard coking coal importing countries such as India."

Costs rise amid eye-watering earnings for BHP coal

Industry Queensland

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