BHP Ltd (ASX:BHP) has replicated what happened last week when ASX “Mag2” counterpart Commonwealth Bank (ASX:CBA) shot up on a better-than-expected earnings result, with Australia’s largest company shooting up +7% on the bourse – unusual volatility for the Aussie giant, even for earnings season.
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Headline half-year results make clear why the stock has now travelled to a market cap of A$273.6 billion (still far off CBA’s recent return to ~A$300B).
Revenue jumped +11% vs pcp to US$27.9B; and most importantly, profit jumped +28% vs pcp(!) to US$5.6B. Underlying earnings margins aren’t far off 60% (closer to 50% this time last year), and the company will, of course, be paying a divvy.
While the company’s net debt has climbed to US$14.7B, nobody was bothered. Probably helping matters Tuesday; BHP announced a separate transaction related to its silver operations, which will see BHP catch an upfront payment of more than US$4B – outside of the results in today’s HY result.
All in all, a pretty good news day for BHP.
Now here’s the bad news
Here’s an interesting tidbit from the BHP HY report on Tuesday. It’s all the way down on page 11, buried in a bunch of boring text:
In other words, BHP is gearing up for a world where China is no longer its major customer. You can reverse engineer that by the fact they’re talking about a Chinese steel production plateau, even if you weren’t intertwined with the Australian context. But this is, clearly, a pretty big deal for BHP. Its own price has long, or up until COVID, at least, been considered an indirect indicator of Chinese economic health.
While BHP pointed to strong copper demand from China in CY25 carrying on into CY26, it’s actually India that cops a lot of mentions in BHP’s HY26 results report.
India, according to BHP, continues to “outperform,” and BHP noted that Indian iron ore demand continues to grow. BHP sees India using up all of its own domestic iron ore, long story short.
And here’s the kicker: The word “India” features in BHP’s February results report more than the word “China.” Now that’s something.
More than just conjecture
This is all important because it’s the most direct public address we’ve had from BHP that it’s facing problems with the longevity of its value prop, so long as that prop is tied to China’s economy.
As I spoke about yesterday for HotCopper’s The ASX Today, while the goings are good for BHP right now off the back of a two-pronged metals rally across the last half, there are questions in the future ahead.
Namely, those questions tend to involve a word that starts with ‘C’ and rhymes with ‘Diner.’ Because while iron ore and copper and gold might have run hard in recent history, it’s BHP’s main meat – iron ore – that remains the big question.
Because while BHP has been telling everybody who asks that its relationship with China is “good,” to quote management in late CY25 – just good, it’s good, stop asking – it’s starting to look like things might not be so good.
Jimblebar export collapse the first crack to show
That’s because over the weekend we learned that one major product BHP exports to Chinese buyers, a type of iron ore product called Jimblebar fines; exports of that product to China collapsed -80% in January.
“That’s because there’s stockpiling of iron ore at Chinese ports,” you might say, and you’re right – but that’s part of a larger story. Because we already know that China’s own (curiously named) state-owned China Mineral Resources Group (CMRG) has been battling BHP over the price of iron ore.
We know that state-linked steel industry executives see an iron price over US$100/tn “irrational,” we know China want to divorce itself from an outright reliance on Oz supply, and we know Rio’s new iron ore Simandou megamine in Guinea has been seriously ignored as a topic of public discussion by anybody at BHP.
I wonder why. More copper, anybody?
BHP last traded at $53.87/sh.
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