BHP Group (BHP.US) has reported a 2% year-on-year increase in iron ore production for the first quarter, raising concerns about oversupply as major miners ramp up output. The mining giant said in a statement on Thursday that it produced 64.6 million tons of iron ore in the three months ending September, maintaining its full-year guidance for the iron ore business at 255 to 265.5 million tons.
Currently, China, the world's largest consumer of iron ore, is attempting to bolster its struggling real estate sector. Although domestic steel demand is suppressed, this reduction has been partially offset by local manufacturing and exports to other Asian markets.
BHP CEO Mike Henry stated in a company document: "China has announced a series of monetary easing policies to support economic growth and has indicated that it will introduce larger-scale fiscal stimulus measures." "The upcoming stimulus measures are likely to focus on easing local debt, stabilizing the real estate market, and boosting business confidence."
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Over the past year, BHP has focused on streamlining its port operations and bringing its South Flank mine in the Pilbara region of Western Australia to full production capacity. Its goal is to reach an annual production of 305 million tons in the medium term, compared to 260 million tons in the previous fiscal year.
Meanwhile, fellow iron ore giants Rio Tinto (RIO.US) and Vale (VALE.US) have also increased their supplies. Rio Tinto released its production report on Wednesday, announcing the start of production at the Simandou mine next year. At the same time, Vale's iron ore production increased by 5.5% year-on-year and plans to further increase output.
BHP said that production of all major commodities in its portfolio has increased, including its copper business, which accounts for about 30% of its annual revenue. Copper production increased by 4% year-on-year during the same period.
The country's largest copper mine, Escondida, saw an 11% increase in production after beginning mining in areas with higher grades. These gains were offset by a 23% drop in the Pampa Norte project. The production of South Australian assets acquired by the company last year through the purchase of OZ Minerals rose slightly.
Henry believes that as China's demand for steel weakens, the copper business will become a core growth area for BHP and will increase the company's exposure in the energy transition.
Earlier this year, BHP made a bid of $49 billion to acquire copper mining giant Anglo American Plc, but ultimately failed. According to acquisition rules, this failure means that BHP had to give up trying to acquire Anglo American Plc for six months. This regulation will expire later next month, potentially opening the door for another new battle between the boards of the two companies.
According to foreign media reports, Henry traveled to South Africa last week to meet with government officials, sparking speculation that BHP may consider a second acquisition of Anglo American Plc, which is headquartered in Johannesburg.Shortly after its failed acquisition of Anglo American, BHP quickly took action and partnered with Lundin Mining Corp. to acquire Filo Corp. for $3 billion, gaining two copper mine assets that span the border between Argentina and Chile.
The company is also expanding its diversification into the potash sector, with its $10.5 billion Jansen mine set to begin production in about two years. BHP said on Thursday that 58% of the mine's development has been completed.