BHP remains positive despite iron ore price squeeze

Iron ore miners continue to feel lower commodity prices, while BHP remains optimistic about trade tensions between Australia and China.

At the end of last week, iron ore prices settled at just over $120 per tonne, well below prices of over $200 per ton in mid-July this year.

In his speech at the Financial Times Mining Summit last week, BHP CEO Mike Henry explained his optimism about China's inclusive growth and development strategy and how it will benefit BHP in the future.

“If you look at China's general policy, it remains pro-growth,” Henry said.

“This will be somewhat disrupted by industry-specific measures in the short term, but end-use demand for machinery, consumer goods, exports and the like remains reasonably strong. We expect this to continue until the 2022 calendar year.” said.

Henry said demand in residential construction provides hope amid a turbulent situation.

“I use the housing sector as an example. On the one hand, we are seeing pressure on housing starts, which will affect short-term steel demand.”

“On the other hand, the work in progress continues to be very strong and we are starting to see a pull towards the completion of the residences, which of course will bode well for copper demand.”

BHP remains committed to the situation between Australia and China, and China's sustained growth mindset is one reason to stay positive.

“Our long-term outlook for China has not really changed with continued strong growth there,” Henry said.

“The big picture outlook for commodities remains really healthy, both in China and globally, where we're starting to see some rebound in inflation, which is talked about.

“Sourcing companies like BHP are at the forefront of this, and at this point we are taking advantage of it through the prices of almost all of our commodities.”

Henry says mining companies that are concerned about the ongoing instability between the two countries should be vigilant and continue to communicate with their Chinese allies.

"In the near term, we need to make sure we double down on our relationship with our Chinese counterparts, both customers and suppliers, and look at how we can cooperate more strongly."

Falling iron ore prices seized four iron ore mines in Australia last month, and Venture Minerals, GWR Group, Indus Mining and Mount Gibson have called to cease operations at their respective mines.