BHP braces for rising costs, labour crunch in ‘volatile’ year ahead

BHP, the largest Australian mining company, has reported a slump in iron ore shipments as new waves of COVID-19 infections hit its workforce and add to labour shortages across its operations.

The mining giant’s output of the steel-making raw material from its operations in Western Australia’s Pilbara region fell 2 per cent to 71.7 million tonnes in the three months to June 30 compared to the same time last year, missing most analysts’ forecasts for 76 million tonnes.

Despite shipping a record-breaking amount of iron ore across the full-year, BHP chief executive Mike Henry on Tuesday warned of significant looming challenges for the company amid “broader market volatility”.

“We expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints,” Henry said.

“Over the year ahead, China is expected to contribute positively to growth as stimulus policies take effect, however, the continuing conflict in the Ukraine, the unfolding energy crisis in Europe and policy tightening globally is expected to result in an overall slowing of global growth.”

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Iron ore – the raw material used in steel-making furnaces to churn out liquid metal – is Australia’s most valuable export, bringing in $133 billion in the nation’s overall export earnings in the past financial year.

However, BHP and rival iron ore miners Rio Tinto and the Andrew “Twiggy” Forrest-led Fortescue Metals Group are facing the threat of falling prices.

Benchmark prices, which averaged between $US110 and $US140 a tonne during the past financial year, have fallen to as low as $US100 a tonne this week as COVID-19 restrictions soften steel demand in China, the world’s largest iron ore consumer.