BHP Group, the world’s biggest miner, has joined rival Rio Tinto in cutting its forecast for iron ore output after a tropical cyclone, although analysts expect high prices to limit any impact on profits.
Cyclone Veronica tore down the coast of Western Australia in March, hitting several iron ore export hubs, in a return of more turbulent weather conditions after several moderate years.
The lower production also led to a rise in BHP’s costs, while Rio Tinto suffered operational issues in the first quarter, including a fire at its Cape Lambert operations, said Brenton Saunders, an analyst at fund Pendal Group in Sydney.
Miners, however, are benefiting from a surge in iron ore prices to near five-year highs on supply concerns following cyclone Veronica and a fatal dam collapse in Brazil that has cut operations at the world’s No. 1 iron ore miner Vale SA .
“If the iron ore price wasn’t $96 and looking like it was going to go higher, then we would be having a very different conversation about these companies’ performance,” Saunders said.
BHP, which put its fiscal 2019 iron ore production under review following the cyclone on Wednesday, lowered its forecast to 265 million-270 million tonnes, from 273 million-283 million tonnes.
Iron ore output for the three months to end-March fell 5 per cent to 64 million tonnes, down from 67 million tonnes a year ago.
Rio Tinto, the world’s No. 2 iron ore miner, on Tuesday reported a 14 per cent drop in quarterly iron ore shipments and trimmed its 2019 shipments estimate.
BHP also increased its full-year production costs to less than $15 a tonne, from less than $14 a tonne previously, due to lower volumes and increased remediation costs.
Since selling its onshore US oil business last year, BHP is focused on just four commodities – iron ore, copper, coal and offshore oil and gas.
The miner posted an 8 per cent drop in quarterly copper production against year ago levels, mainly due to lower output at the world’s biggest copper mine, Escondida in Chile.
However, it maintained annual production guidance for copper at 1.65 million tonnes to 1.74 million tonnes.