Costs balloon for commodities producers as demand hits headwinds
Mining giant BHP has joined rival Rio Tinto in signalling more turbulence to come for commodities producers as costs balloon and demand for everything from iron ore to copper hits headwinds.
While profitability is still strong, both miners “are trying to prepare the market in case we see a significant slowdown in Chinese demand”, Gavin Wendt, a senior resource analyst at MineLife said. “The tougher conditions are coming at a time when prices they are receiving from commodities are easing, putting pressure on margins.”
At the same time, miners face rising costs. “We expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints,” BHP’s CEO Mike Henry said in the statement. Rio last week announced a 5% increase in its quarterly iron ore shipments. Vale, which vies with BHP for the No 2 spot behind Rio in iron ore output, is due to report its production figures for the period later on Tuesday.
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