Theminer also flagged a 20% jump in costs for its Jansen potash project in Canada. — Reuters
MELBOURNE: Australian mining giant BHP Group has accepted lower prices for some iron ore during annual contract negotiations with China, it said, as it reported record first-half production of the key steelmaking ingredient.
The Melbourne-headquartered miner also flagged a 20% jump in costs for its Jansen potash project in Canada.
BHP is currently negotiating annual contract terms with state iron ore buyer China Mineral Resources Group (CMRG). It flagged it is looking to sell more of its products in other markets.
“During negotiations, we continue to optimise product placement distribution channels and take actions within our operations to preserve operational flexibility and productivity,” BHP said in a statement. “This has seen some impact on the realised price.”
The statement is a rare acknowledgement from the world’s biggest listed miner about the impact of its protracted negotiations with CMRG, which has been trying to extract better terms for Chinese steelmakers, in an unfolding scenario that will be closely watched by its peers.
While BHP has been raising its production of copper, iron ore is still its biggest profit generator.
Since September, China’s state-owned iron ore buyer has ordered steel mills and traders to stop purchasing multiple types of BHP iron ore, sources have told Reuters.
RBC Capital Markets analyst Kaan Peker said CMRG’s restrictions on purchases by Chinese steelmakers were likely to tighten spot market availability and support the headline index price, offsetting the higher discounts BHP was facing.
BHP separately said the total investment estimate for its Jansen Stage 1 project would increase to US$8.4bil from a previously estimated range of US$7bil to US$7.4bil reported in July 2025.
It said the cost increase reflected construction hours and quantities of materials that were not included in previous estimates.
When the project was approved in August 2021, the initial investment cost for Jansen stage 1 was US$5.7bil.
BHP said iron-ore production from its Western Australia operations on a 100% basis was a record-high 146.6 million tonnes in the six months ended Dec 31, a 1% increase from the same period last year.
For the December quarter, iron-ore production on a 100% basis was 76.3 million tonnes, up from 70.2 million tonnes in the September quarter.
The second-quarter iron-ore production beat a Visible Alpha consensus estimate of 74.3 million tonnes.
The miner kept its full-year iron-ore output forecast unchanged at 284 million tonnes to 296 million tonnes, noting the strong first-half production had put BHP in a solid position ahead of the typically wet third quarter.
BHP raised the bottom end of its copper production forecast. It now expects to produce between 1.9 million tonnes and two million tonnes of copper in the financial year ending June 30, slightly higher than the previous forecast of between 1.8 million tonnes and two million tonnes.
The miner said the outlook shift was driven by strong operational performance across its copper assets.
BHP also kept the annual coking coal forecast for the BHP Mitsubishi Alliance unchanged, but said output was likely to land in the lower end of the range due to ongoing geotechnical challenges at its Broadmeadow mine.
BHP will report its half-year financial results on Feb 17. — Reuters
