Mining Giant BHP "Cautiously Optimistic" About China Economy

Mining giant BHP Group chief executive Mike Henry said on Friday he was “cautiously optimistic” about China’s economic future.

Speaking at the FT Mining Summit in London, Henry said China is already showing signs of a revival due to more supportive government policies of late.

“There is uncertainty in China – albeit, our view is that China is still going to provide a bit of stability or underpinning to global economic growth over the next 12 months,” the head of the world’s largest listed mining company said.

Also on AF: Yuan Sinks to Lowest Since 2008 Despite State Banks’ Support

“We are seeing some green shoots in China by way of property sectors, so increased sales and increased completions,” Henry said.

“We are not yet seeing that pull through to an increase in housing starts but we are seeing some more supportive policy, with encouragement being given to the banks to relax some of their lending practices for the property sector.”

China’s economic outlook has been hampered by stringent Covid-19 curbs, disruptions to energy and food supplies caused by the Ukraine crisis and slowing global growth, on the back of sharp rises in borrowing costs to curb red-hot inflation.

The International Monetary Fund forecasts China’s GDP will expand by just 3.2% this year, down from 8.1% growth in 2021.

So far, China has fought shy of the huge amounts of stimulus it introduced when economic weakness led to a drop in demand and a commodity price crash in 2015/16.

Raw Material Dominance

China, the world’s second largest economy, accounts for more than 50% of global demand for raw materials.

“We see steel production in China probably seeing another billion tonne-plus year, a slight decline from last year by 1-2%, and then rebounding next year by circa 1%, for what would then be the fifth year running of over a billion tonnes of steel production,” Henry said.

BHP is a top producer of iron ore, used in the making of steel going into the construction industry, with more than 250 million tonnes mined in the financial year to June.

The mining giant is currently exploring whether it could increase iron ore productivity to above 300 million tonnes a year, Henry added.