BHP Expects Iron Ore Supply to Normalize in 1-3 Years -- Commodity Comment

SYDNEY--BHP Group Ltd. (BHP) , the world's largest miner by market value, released its fiscal-year earnings report on Tuesday. Here's what BHP had to say about metal and energy markets.

Iron Ore Supply to Normalize in 1-3 Years:

"In addition to the decline in Brazilian exports, prices have responded to stronger than expected Chinese pig iron production and cyclone disruptions to Australian supply. We expect supply conditions will return to a more normal path on a one to three year time frame, and prices are likely to be volatile as that adjustment plays out. In the longer term, the marginal price-setting ton will be provided by a higher-cost, lower value-in-use exporter from Australia or Brazil."

China Import Policies a Cloud Over Metallurgical Coal Outlook:

"The Platts Premium Low-Volatile Metallurgical Coal price index reached a high in the middle of the 2019 financial year amid supply constraints in Queensland. Prices eased from the peak on weaker European demand and improved Australian supply. China's import policies remain a source of uncertainty. Longer term, we expect India to sustain strong demand growth, while high-quality metallurgical coals are expected to continue to offer steelmakers value-in-use benefits."

Copper Demand Will Steadily Rise:

"Copper prices have been heavily influenced by swings in global trade uncertainty in the second half of the 2019 financial year. Against this backdrop, we believe underlying fundamentals remain sound. Copper demand should grow steadily. Grade decline, rising input costs, water constraints and a scarcity of high-quality future development opportunities continue to constrain the industry's ability to meet this growing demand at low cost. Scrap supply and aluminium substitution are constraints on the upside."

Nickel Supply, Demand Seen in Sync in Near Term:

"Nickel prices have also been heavily affected by trade uncertainty in the second half of the 2019 financial year. In our view, growth in supply should keep pace with demand from traditional uses in the near term. The electrification of transport will require on-going investment in new sources of supply in the coming decades."

Oil Outlook Remains Positive on Rising Demand:

"Crude oil prices were volatile in the second half of the 2019 financial year. Swings in global growth expectations, strategic behaviour of major producers, falling production in Venezuela and Iran, and geopolitical risk, all contributed to price volatility over the last six months. The fundamental outlook remains positive, underpinned by rising demand from the developing world and natural field decline in supply."

Global LNG Prices to More Closely Align:

"The Japan-Korea Marker price for LNG was lower on average in the second half of the 2019 financial year, reflecting slower growth in North Asian demand and a large increment of new supply from project ramp-ups. Longer term, we expect LNG to grow faster than overall gas demand, with price formation progressing towards global harmonization."

Potash Demand to Exceed Supply by Mid-to-Late 2020s:

"Potash prices continued their gradual upward trend in the second half of the 2019 financial year, but weakness has recently started to appear in some markets. Regional demand has been mixed in the 2019 calendar year to date, with China the positive standout. We expect annual demand growth of 2-3% over the next decade, resulting in demand exceeding available supply from on-stream, latent and forthcoming capacity by the mid-to-late 2020s."

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com


  (END) Dow Jones Newswires
  08-19-19 2012ET
  Copyright (c) 2019 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.