MARKETS

Prices dampen BHP's record coal production result

BHP Billiton's record production of metallurgical coal despite wet weather disruptions in Queensl...

Blair Price

The outlook for coal and commodity prices generally in the short term remains uncertain, BHP Billiton chief executive Marius Kloppers said in the company’s profit statement.

“BHP Billiton remains cautious on the short-term outlook for the global economy,” he said.

“Following a broad recovery in prices for the majority of BHP Billiton’s products, the short-term outlook for commodities is mixed.

“With global steel production running ahead of real demand in the quarter ended June 2010, we expect output to soften from the record highs achieved in April this year. This will impact near-term demand for steelmaking raw materials, however the fundamentals remain strong in those commodities.”

The company’s overall annual profit was 116% higher year-on-year at $US12.72 billion with revenues 5.2% higher at $52.79 billion.

Metallurgical coal production for the year was up due to improved operational and supply chain performance, supported by strong demand and the control of operating costs, the company said.

But lower realised prices for hard coking coal (34%), weak coking coal (33%), and thermal coal (11%) took their toll on the result.

During the second half of the financial year, the old benchmark pricing system for iron ore and metallurgical coal was replaced by shorter term market based pricing.

The transformation ensures the majority of BHP Billiton’s bulk commodities, including metallurgical coal and energy coal, are now linked to market based prices.

Underlying EBIT for BHP Billiton’s energy coal division was $US730 million, a 50% decrease year-on-year, mainly due to lower average export prices which decreased earnings by $US535 million.

This was offset by a $US76 million benefit related to price-linked costs.

Production was in line with the previous year with a 10% increase in export sales attributable to the continued ramp-up of the Klipspruit (South Africa) expansion and record production at Mt Arthur in the Hunter Valley of New South Wales.

Weaker production at New Mexico Coal (USA) reflected a downturn in demand from the dedicated power generators.

Operating costs were well controlled despite the adverse impacts of a weaker US dollar and inflation, the company said.

BHP’s shares were 38c down to $37.06 in morning trade.

TOPICS:

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining Monthly Intelligence team.

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining Monthly Intelligence team.

editions

ESG Mining Company Index: Benchmarking the Future of Sustainable Mining

The ESG Mining Company Index report provides an in-depth evaluation of ESG performance of 61 of the world's largest mining companies. Using a robust framework, it assesses each company across 9 meticulously weighted indicators within 6 essential pillars.

editions

Mining Magazine Intelligence Exploration Report 2024 (feat. Opaxe data)

A comprehensive review of exploration trends and technologies, highlighting the best intercepts and discoveries and the latest initial resource estimates.

editions

Mining Magazine Intelligence Future Fleets Report 2024

The report paints a picture of the equipment landscape and includes detailed profiles of mines that are employing these fleets

editions

Mining Magazine Intelligence Digitalisation Report 2023

An in-depth review of operations that use digitalisation technology to drive improvements across all areas of mining production