BHP, Australia’s largest miner, is undergoing a significant structural transformation, as it shifts focus from its iron ore operations to copper and potash. This transition, although planned for years under CEO Mike Henry and Chairman Ken MacKenzie, faces challenges due to waning demand for iron ore and rising competition in the global market. As Ross McEwan steps into the chair role next month, BHP is poised to face a critical period of adaptation.
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BHP’s Market Performance
- Last Price: $40.97
- Change: +0.17 (+0.42%)
- One Week Change: +2.20%
- One Month Change: +2.30%
- 2025 YTD Change: +3.59%
- Market Capitalisation: $207.97B
Despite the ongoing transition, BHP’s share price has shown a modest positive trend in 2025, with a notable increase of 2.30% in the past month. However, the company is facing a downturn in profits due to a drop in iron ore earnings, which has been its main source of revenue for years.
The Transition from Iron Ore to Copper
BHP’s historical reliance on iron ore as a profit driver is becoming less sustainable. The company’s latest half-year results reflect a significant downturn in its iron ore operations. Earnings before interest, tax, depreciation, and amortisation (EBITDA) from iron ore fell by 26%, which resulted in a $2.7 billion drop in profits compared to the same period last year. This decrease is attributed to a 22% drop in iron ore prices.
Key Issues in Iron Ore
- China’s demand for iron ore appears to have peaked.
- Global economic slowdowns, including challenges within China’s economy, are affecting the commodity’s pricing.
- New competition is entering the market, notably the Simandou project in Guinea.
Despite these challenges, BHP remains a low-cost producer of iron ore, which gives it a competitive edge. However, the company’s ability to significantly grow its iron ore earnings in the near future remains uncertain, given China’s economic struggles and the expected new supply entering the market.
BHP’s Copper Strategy: A Growing Opportunity
In contrast to the decline in iron ore earnings, BHP is seeing a significant rise in copper production. The copper segment saw a 44% increase in EBITDA, reaching $US5 billion, largely driven by a 5.3% rise in copper-equivalent volumes. This growth is a positive sign for the company’s future, as copper is becoming a crucial element for industries such as renewable energy, electric vehicles, and technology.
BHP’s chief executive, Mike Henry, is optimistic about the future of copper, noting that “demand for copper isn’t exposed to a particular economy.” Copper has multiple buyers and a wide range of applications, making it less reliant on any one nation’s economic performance. BHP is positioning itself as a low-cost copper producer, leveraging its vast resource base and significant development projects in Australia, Chile, and Argentina.
- BHP’s copper production is expected to grow by 24% over the next three years.
- The company owns 45% of the Resolution mine in Arizona, one of the world’s largest undeveloped copper resources.
BHP’s Response to Global Inflation and Commodity Prices
BHP’s profits took a hit not only from lower commodity prices but also from global inflationary pressures. In its half-year results, BHP recorded a 23% drop in underlying earnings, largely driven by weak iron ore and steelmaking coal prices. However, the company managed to mitigate some of the financial impact through productivity initiatives and cost discipline.
The company also faced challenges from external factors such as inflation and trade policies. BHP acknowledged the impact of policy on trade and inflation, particularly with regard to the United States and its trade partners.
Despite these issues, BHP is optimistic about the future. The company expects a gradual recovery in developed economies, with the US economy likely to outperform others. BHP also anticipates that India will continue to be the fastest-growing major economy, which could provide further opportunities for copper sales.
Dividend Reduction and Future Outlook
In response to its lower earnings, BHP announced a 30% reduction in its interim dividend, the lowest payout in eight years. The $US0.50 per-share dividend reflects the impact of falling commodity prices, particularly in iron ore and coking coal.
BHP’s CEO, Mike Henry, remains hopeful about the company’s long-term prospects, especially with the ongoing growth of copper production. He is betting on copper’s critical role in the modern economy and believes that BHP’s low-cost production advantage positions the company well for future growth.
Conclusion: BHP’s Strategic Shift Towards Copper
BHP is navigating a period of transition, balancing the decline in iron ore demand with the growth potential in copper. The company’s strategy of diversifying into copper and potash, while maintaining its competitive edge in iron ore, will be critical to its future success. The outlook for BHP’s share price will depend on the global economic environment, the demand for copper, and its ability to manage the structural shift in its business model.
Despite challenges, BHP’s low-cost production and expansion plans for copper suggest a promising future. As the company continues to adapt, investors will be closely watching how this historic transition unfolds in the coming years.
Related Articles:
- “BHP Faces New Challenges Amid Shifting Commodity Markets”
- “Copper’s Rising Demand: How BHP is Positioned for Growth”
- “BHP’s Strategic Focus on Copper and Potash: What Investors Need to Know”
