BHP wards off challenges, bounces from the lows
BHP is facing short term issues because of China’s pause on iron ore purchases to get lower prices in future but the company is still in a strong position as It has big scale, a mixed portfolio and support from global demand which keeps it well placed for long term growth and stability.
BHP Group (ASX: BHP)
BHP Group is facing a challenge as China’s state owned China Mineral Resources Group (CMRG) has reportedly told steelmakers and traders to pause all iron ore purchases from BHP due to failed contract negotiations and pricing disputes. The dispute is mainly about discounts on BHP’s medium grade ore and many see it more like a move by CMRG to get better leverage rather than a full political trade ban. Around 55–65% of BHP’s sales go to China and analysts think China is trying to cut down the power of big iron ore miners. BHP produced 263Mt of iron ore in FY25 of around 160Mt went to China which means that BHP alone supplies about 13% of Chinese iron ore imports which is a huge gap that would be impossible to fill given that competitors such as Fortescue, Rio Tinto and MinRes have way lower capacity.
BHP had a good year in FY25 with record outputs in iron ore and copper thanks to solid operations. On the financial side of things for FY25 BHP booked underlying EBITDA of about US$26B with margins of 53%. Profit after tax of US$10.2B and operating cashflow of US$18.7B. This shows how resilient the business was even with lower commodity prices. Spending on capital and exploration was US$9.8B with most of it going into copper and iron ore. Net debt climbed to US$12.9B from US$9.1B as the company funded its growth projects while shareholders received US$5.6B in dividends.
Looking forward BHP is focusing mainly on copper, potash and iron ore to drive its future growth. For FY26 the company gave guidance of about 1.8–2.0Mt of copper, 258–269Mt of iron ore and 36–40Mt of metallurgical coal. BHP’s costs are expected to stay among the lowest worldwide. Capital spending is planned carefully with around US$11Billion capex in FY26 out of which about 40% will go into growth projects. The company holds a strong portfolio of world class assets with a long life and low operating costs. Together with its focus on running operations efficiently and capital discipline, BHP seems to be in a good position for it’s long term goals.
(Source: Company Announcements)
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