BHP iron ore output slumps

BHP’s Australian iron ore exports failed to match last year’s output for the third consecutive quarter, extending a trend of weak supply from the world’s biggest miners.

A massive slump in BHP’s coking coal production was also revealed in Tuesday’s quarterly report, helping to explain the extraordinary surge in prices for the commodity in recent months to record levels.

Iron ore is BHP’s most lucrative business, and the company shipped 70.8 million tonnes of the commodity in the three months to September 30.

That result was 3.5 per cent lower than BHP achieved in the same period last year and 4 per cent lower than in the three months to June 30.

Output at Port Hedland was hampered over the past month by a major maintenance campaign on one of the “car dumpers” that tip iron ore out of train carriages, but a shortage of train drivers is also starting to bite BHP’s production volumes.

While labour shortages in Western Australia have been well known for several years, the clearest sign they could curb BHP’s iron ore production came in a leaked internal memo from May 21.

“To deliver our budget production targets we must be able to consistently deliver 160 driver sign-ons per day, but this is not happening,” said the company in the memo to train drivers, who were subsequently asked to work tougher rosters.

Rio Tinto’s iron ore division suffered big cost and schedule blow outs on its “Autohaul” autonomous train program over the past decade, but the company has reaped the benefits of the project through the extreme labour shortages of 2020 and 2021.

BHP’s weak September quarter performance in WA came after the company’s iron ore exports in the six months to June were 4 per cent lower than the same period last year.

BHP is the second biggest producer of Australia’s most lucrative commodity export, but appears likely to join the biggest exporter, Rio, in shipping less iron ore in 2021 than in 2020.

The soft performance by Rio and BHP comes as Brazilian iron ore miner Vale remains well below the production rates it achieved before devastating dam failures curbed its output in January 2019.

“Aggregate shipments of the major seaborne suppliers are trending flat year-on-year and are not expected to regain their 2018 levels for the third consecutive year,” said Rio last week, in a comment that appeared to apply to itself, BHP and Brazilian giant Vale.

BHP has vowed to ship between 278 million and 288 million tonnes of iron ore from Western Australia in the year to June 2022, including volumes owned by minority partners like Mitsui and Itochu.

If the export rate achieved by BHP in the soft September quarter was maintained for the year to June 2022, the company would ship about 281 million tonnes in the year.

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