BHP Group (BHP, Financial) reported a 2% year-on-year increase in iron ore production for the first quarter, leading to concerns over potential oversupply in the market. The mining giant produced 64.6 million tons of iron ore in the three months ending September 30 and maintained its full-year target of 255-265 million tons. This growth comes as China, the world's largest iron ore consumer, seeks to stimulate its struggling real estate sector. Although domestic steel demand is subdued, it is partly offset by manufacturing and exports to other Asian markets.
BHP's CEO, Mike Henry, mentioned that China has announced monetary easing policies and plans for substantial fiscal stimulus, focusing on easing local debts, stabilizing the real estate market, and boosting business confidence. Over the past year, BHP has been optimizing its port operations and achieving full capacity at its South Flank mine in Western Australia's Pilbara region, aiming for a mid-term output of 305 million tons per year, up from last fiscal year's 260 million tons.
In parallel, other iron ore giants like Rio Tinto (RIO) and Vale (VALE) have increased their supply. Rio Tinto shared its production report and plans to commence production at Simandou next year. Vale's iron ore production grew by 5.5% year-on-year, with intentions for further increases.
BHP also reported growth across all major commodities in its portfolio, including a 4% increase in copper production, which accounts for approximately 30% of its annual revenue. The Escondida mine, the country's largest copper mine, saw an 11% production boost after mining higher-grade areas, though gains were offset by a 23% drop at the Pampa Norte project. Production from assets acquired from OZ Minerals in South Australia saw modest growth.
Henry sees copper as a key growth area for BHP amid declining steel demand in China, positioning it to capitalize on the energy transition. Earlier this year, BHP attempted a $49 billion acquisition of copper giant Anglo American Plc, which was unsuccessful. According to acquisition rules, BHP had to halt takeover attempts for six months, a period expiring soon, potentially reopening acquisition talks.
Speculation has arisen about another takeover attempt after Henry's recent visit to South Africa for discussions with government officials. Following the failed Anglo American bid, BHP quickly partnered with Lundin Mining Corp. to acquire Filo Corp. for $3 billion, securing copper assets in Argentina and Chile.
The company is also diversifying into potash, with its $10.5 billion Jansen mine scheduled for production in about two years. BHP reported that 58% of the mine's development is complete.
