4 months ago • 2 mins
What’s going on here?
Mining giant BHP reported some seriously disappointing results on Tuesday.
What does this mean?
Rewind to a year ago, and BHP was riding high, boasting its highest-ever annual profit, thanks to booming commodity prices. But this year’s not so wonderful – and the thorn in its side is China-shaped. See, the world’s biggest metals consumer is in an economic funk right now, particularly in its property sector. And that’s a big deal for BHP: after all, construction in China is steel-hungry, meaning the country’s usually a big buyer of BHP’s iron ore. And sure, India did offer a shoulder to cry on, with ambitious plans to more than double its own steel production. But in the end, slack Chinese demand, dwindling commodity prices, and climbing costs saw BHP’s earnings taking a 37% nosedive from last year, marking its lowest annual profit in three years.
Why should I care?
Zooming in: Not just a wooden nickel.
BHP’s fate echoes that of its rival, Rio Tinto. And with predictions that steel and iron ore demand will shrink further this year, it looks like the industry’s tough times are set to continue. But BHP isn’t just sitting around. The firm’s pivoting toward future-proof commodities like copper, potash, and nickel, betting big on population growth and the clean energy shift. It’s putting its money where its mouth is too, upping its investments in the space in the hopes that these ventures will soon account for half its total revenue.
The bigger picture: Sinking foundations.
China’s trying to jumpstart its property sector, but its policies haven’t yet translated into changes on the ground. And that makes sense: despite the slowdown, authorities have been slow to take any truly big steps to encourage building on a grand scale. And if they’re not careful, that hesitation could backfire – letting the property sector’s inertia slow the broader economy down even more.
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