BHP believes development in China and India will increase demand regardless of falling income

The BHP Group logo adorning the side of its global headquarters in Melbourne on February 21, 2023.

Wilhelm West | AFP | Getty Images

Australian mining giant BHP is optimistic that growth in China and India will boost demand for commodities, even as the company reported a sharp fall in half-year earnings.

“We believe Chinese growth and Indian growth will provide some counterbalancing and support to overall growth over the next six to 12 months and beyond,” CEO Mike Henry told CNBC “Street Signs Asia” on Tuesday.

In an earnings release, BHP said the long-term outlook for the company’s raw materials “remains strong,” supported by population growth, rising living standards and energy transition metal demand, which includes raw materials for steelmaking.

His comments come as the miner saw a 16% drop in revenue from $30.53 billion to $25.71 billion in the six months to December. The company’s half-year profit was $6.46 billion, down 32% from the $9.44 billion for the same period last year.

BHP attributed the declines to lower iron ore and copper prices. During the six-month period, iron ore prices fell to a low of $80.03 a ton on November 1st, while copper hit $3.29 a pound on September 27th.

Shares of BHP in Australia closed down 0.33% on Tuesday.

Still, the global miner is bullish despite slowing growth in the US and Europe.

“As we move into the second half and then into next year, we are seeing momentum building in China, which of course bodes well for the products that BHP makes,” said Henry.

China’s reopening and growth in the energy transition and automotive industries have fueled demand for commodities such as iron and copper, which are significant sources of revenue for BHP.

Other investment opportunities

The miner also sees investment and growth opportunities elsewhere with South American and African partners.

“There are a number of South American countries and African countries that are aggressively chasing international capital that have come our way – and others, I’m sure – to try to lure us into the country to invest further , and they offer attractive tax conditions,” he said, without naming specifics.

He added that BHP is currently building a portfolio of growth options, particularly in mining deposits that have yet to be developed.

“We have a few of these in South America. We [also] also invested in a potentially large, highly attractive nickel resource in Tanzania.”

Henry said BHP is also closely monitoring mining tariffs in Chile, the world’s largest copper producer, and looking for growth opportunities there as well.