China"s iron ore demand decline in 2024 impacts market players

BHP has issued a warning regarding a significant decline in iron ore demand from China, anticipated to impact high-cost suppliers adversely. The company predicts that Chinese blast furnace run rates will decrease in 2024 due to low steel margins and potential production controls driven by policy changes. This decline is further exacerbated by an increasing reliance on scrap-based steel production, which is expected to reduce pig iron output in China. Despite these challenges, BHP plans to boost its production at the Western Australia Iron Ore (WAIO) operations to over 305 million tonnes per annum in the medium term, maintaining its position as the lowest-cost major iron ore producer globally. The mining giant has also reported a significant loss of $5.8 billion, primarily due to a $2.7 billion impairment related to its Western Australian nickel operations and a $3.8 billion charge from the Samarco dam failure. However, revenue growth was noted, attributed to higher realized prices for iron ore and copper, alongside increased sales volumes. BHP's capital and exploration expenditure rose by 31% to $9.3 billion, reflecting a strategic shift towards future-facing commodities such as copper and potash. BHP's CEO, Mike Henry, emphasized the company's commitment to advancing growth in commodities essential for energy transition and population growth. The company anticipates that factors like urbanization and rising living standards will continue to drive demand for steel and non-ferrous metals. In addition to iron ore, BHP is focusing on increasing its Copper South Australia production to over 500 kilotonnes per annum, with potential growth up to 650 ktpa. The Jansen potash project in Canada is also progressing ahead of schedule, with production expected to commence in just over two years.