Lower coal prices hit BHP half-year results

BHP has reported a 52 per cent drop in underlying EBITDA from its steelmaking coal operations in Queensland during the first half of this financial year. This was driven by lower average realised prices, which decreased 23 per cent, and the divestment of its Blackwater and Daunia mines to Whitehaven Coal, the company said. However, the company reported making solid progress in re-establishing its raw coal inventory levels as planned, while at the same time improving strip ratios and increasing production 14 per cent (excluding the now divested Blackwater and Daunia mines). All of this was underpinned by the group's highest half-year of prime stripping in four years, reflecting a continued focus on productivity. The mines the company owns as part of the BHP Mitsubishi Alliance are expected to produce 33 to 38Mt this financial year. 'BMA is starting to realise the benefits from simplified operations and transport logistics, following the divestment of Blackwater and Daunia in FY24, including the shipment of all products through the Hay Point Coal Terminal,' the company reported. 'In the next five years, we expect to increase production to between 21.5 and 22.5 Mtpa (43 and 45 Mtpa on a 100 per cent basis). At that point, we anticipate that unit costs will be less than $US110/t. 'Given the negative impact on investment economics resulting from the change in coal royalty rates, and the increase in sovereign risk due to the decision to raise royalties without consultation, we will not be investing in any further growth at BMA, however we will sustain and optimise our existing operations.' Steelmaking coal prices trended lower in the first half of this financial year as global pig iron production declined and supply in key regions recovered, BHP stated. Chinese domestic steelmaking coal production has ramped up quickly over the past six months resulting in higher inventories at local mines and ports in recent months. Australian steelmaking coal supply recovered modestly, along with the increases in Russian and US exports. Over the past two years, growing merchant coke exports from Indonesia and China have offered cost-effective options to ex-China blast furnace steelmakers. In the near term, BHP sees the overall steelmaking coal market as facing a modest surplus. New blast furnace capacity additions in India and Southeast Asia are expected to offset the anticipated slowdown in steelmaking coal imports from China and OECD countries. Chinese domestic coal supply policy remains as the key uncertainty for global steelmaking coal markets. Over the longer term, BHP forecasts that higher-quality steelmaking coals, such as those produced in the Bowen Basin, will be valued for their role in reducing the greenhouse gas emissions intensity of blast furnaces. 'This, combined with the growth by the steel industry in hard coking coal importing countries such as India, should see growing and resilient demand for decades to come.' the company stated. 'With the major seaborne supply region of Queensland not being conducive to long-life capital investment as a result of the current royalty regime, the scarcity value of higher-quality steelmaking coals may also increase over time."

Lower coal prices hit BHP half-year results

Industry Queensland

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