BHP Group (BHP) released its first-quarter production numbers this morning, with copper shipments coming in at 410.1kt, below the consensus of 430.4kt, but up 9% from the previous corresponding quarter. BHP’s CEO has stated, “We have started the financial year strongly”. Copper, iron ore and nickel production are all up at this time last year, with the only exception being met coal, which fell 38% due to the extreme wet weather conditions that have been lashing the nation. Cost and revenue guidance has been reaffirmed for FY23, and the company remains on track despite a warning about a labour shortage. BHP has also confirmed that the first potash production from the Jansen project is expected to begin in 2026, with construction on schedule.  

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Broker Stuff

UBS has updated their broker outlook this morning retaining its NEUTRAL recommendation and target price of 3550c implying a 9.8% downside. It will be interesting to see what other brokers say when their research comes out shortly.

Macro Outlook 

Current international news points to a weakening global demand and the slowing down of the economy. These factors have begun to push the price down for iron ore, copper, and nickel, all falling in the past year. This was only stimulated further by China’s announcement earlier this week, doubling down on their Zero-Covid Policy. This gives little hope for a boost in economic activity stemming from the nation as they reduce their intakes of commodities and ramp up production of their own coal mining. BHP CEO also admits, “We expect global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability.” With the numerous headwinds stacking up against the mining giant, the case for investment is becoming increasingly harder to justify. The commodity cycle looks to be changing, it’s been a good run, but concerns are well and truly shifting towards a recession.