BHP sees 2-3 years of elevated costs, near-term copper oversupply
Friday, November 25th, 2022
BHP Group, the world’s largest listed miner, is bracing for rising costs into the middle of the decade, adding to headwinds facing the copper market which is facing short-term oversupply, an executive said on Wednesday.
“We’ve seen some substantial cost inflation. We don’t think we’ve seen the end of it yet. We think this is going to be a period of between the next 2 years or 3 years,” said BHP’s Chief Development Officer Johan van Jaarsveld.
Surging inflation due to the Ukraine-Russian war and supply chain disruptions have prompted global central banks to jump in and sharply raise interest rates in efforts to dampen rising prices, risking a recession.
Jaarsveld’s comments echoed market participants’ expectations for rising concentrate supply, which is seen as outpacing smelting capacity growth and leading to a surplus in the market next year.
But that surplus will have evaporated by the end of the decade, Jaarsveld said on the sidelines of the CRU World Copper Conference Asia in Singapore.
“We’re still very bullish, (given the) demand macroeconomics trend driven by decarbonisation, specifically things like electric vehicles coming on.
“The challenge that all of us have is the grade dropping. We are not discovering enough new deposits. So it does make for, in long term, quite a structural deficit,” he added.
Stimulus measures in China, the world’s top copper consumer, have helped with demand in some sectors, except for real estate.
“There are some positive signs but I think the (Covid-19) lockdowns and the uncertainty associated with that… really holds things back a little bit. You just don’t know what’s going to happen.”
“We have been blown away… by the amount of interest with that. We’ve had to put extra people on just to process all the applications,” he said.