Reuters
Published Nov 01, 2022 02:04PM ET
By Praveen Menon
SYDNEY (Reuters) - BHP Group (NYSE:BHP) Ltd, the world's biggest miner by market value, said on Wednesday that inflationary pressures would remain a challenge next year, but that China will provide a source of stability for commodity demand.
The mining industry has been weighed down this year since the Russian invasion of Ukraine by a supply bottleneck that sparked off inflation and erased the demand-led inflation the industry had enjoyed previously, James Agar, BHP’s group procurement officer, said in a speech at the International Mining and Research Conference in Sydney.
"We do expect the lag effect of inflationary pressures to remain a persistent challenge through the 2023 financial year," Agar said. Globally, the near-term macro outlook remains very uncertain and fragile, he said.
Mining firms have been warning high inflation could hit short-term demand and slow growth plans, although earlier this year skyrocketing prices for iron ore and other resources buoyed profits.
Prices of iron ore have since fallen due to a gloomy outlook for China, the world's biggest steel producer.
Agar said Europe and the U.K. are "almost certainly going to experience recession", and the U.S. economy will slow down. But China's demand for commodities will return as government stimulus measures take effect.
"We think China will be a source of stability for commodity demand over the next 12 months, as stimulus policies progressively take effect," Agar said.
"While stimulus has produced growth in infrastructure and autos, we expect improvement in the housing sector to take a bit longer. The zero-Covid policy remains an overhang that creates additional uncertainty," he said.
Written By: Reuters
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