BHP Group says external environment in FY24 ‘relatively volatile’

The company stated: “BHP‘s external operating environment in FY24 remained relatively volatile. Our key commodity prices were mixed with significant variation in performance between individual commodities. In the near term, we expect steady global growth slightly above 3% for CY24 and CY25. Major economies are expected to diverge in their growth outlooks, with developed economies facing less of a drag from higher interest rates, China experiencing an uneven recovery among its end-use sectors, and India likely to continue as the fastest growing major economy. Geopolitical risks remain relatively elevated and are likely to remain so in the near term. Inflation has been easing across our major operating regions, although the trajectory towards central bank inflation targets will continue to be bumpy. And while wage growth has largely normalised in Chile and has recently peaked in Australia, we still expect the lagged impact from inflation and some lingering labour market tightness to impact our cost base into FY25. Demand for commodities in the developed world has been relatively soft over CY23 and into CY24 as anti-inflationary policies, sluggish industrial activity and the last of the lagged impacts of the energy crisis were felt. The impact of higher interest rates is expected to continue to restrain household consumption in the developed world for the balance of CY24, but we expect steel, copper and nickel demand to recover across the OECD. China is on track to meet official CY24 macroeconomic growth targets, but the property sector is likely to remain a drag. India is expected to continue as a bright spot for commodity demand. The Chinese economy has been volatile since CY23, with a steady recovery in a range of sectors important to copper demand, for example power infrastructure, transport and consumer durable goods. Weakness however continued in the steel-intensive real estate sector. Policymakers have acknowledged that more support is needed to embed a recovery in this sector, and in mid-CY24 a more decisive policy pivot emerged with the objective to reduce the oversupply in the market. Against this backdrop, steel production was lower in H1 CY24 compared to the previous year, however annual steel production is still expected to be more than 1 Bt for the sixth consecutive year. We believe that China’s economic transition could accelerate its demand shift increasingly towards ‘future-facing commodities’. The picture has been more positive in India, where a capital investment upswing continues to be well entrenched and commodity demand has been robust. The Indian economy has maintained healthy momentum after the general election, particularly in relation to demand linked to the steel sector. Over the long term, the outlook for our key commodities remains positive. We continue to expect that population growth, urbanisation, rising living standards, and the infrastructure required for decarbonisation and electrification will drive demand for steel, non-ferrous metals such as copper, and fertilisers.”