China looks set to continue its run of record annual steel production.
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BHP Group Ltd (ASX: BHP) shares have come under pressure amid falling iron ore prices.
Indeed, after hitting record prices of US$237 (AU$324) per tonne back in May, iron ore is currently trading for US$90 per tonne, down some 62%.
Those falls have seen BHP shares slide 24% over the past 6 months. But the S&P/ASX 200 Index (ASX: XJO) mining giant’s CEO, Mike Henry, remains bullish on the global economic outlook.
And he’s confident that China’s not about to stop producing record amounts of steel.
Reasons for optimism
Addressing BHP shareholders at the company’s annual general meeting (AGM), Henry ran through the list of growth opportunities on the horizon.
“The big trends unfolding in the world around us,” he said, “include population growth, rising living standards, electrification and decarbonisation. We want to grow in those commodities that stand to benefit greatest from these trends.”
To that end, Henry said that in the financial year gone by, BHP “invested more than US$5 billion in development, growth and exploration across our business.”
And on the sustainability front, he added, “We are also targeting net zero for our direct suppliers’ emissions from the provision of goods and services to BHP, also by 2050.”
How BHP shares can still benefit from Chinese demand
While iron ore prices have plummeted from their May records, Henry noted that the metal is still trading at historically high levels. And he said Chinese demand for the core steel-making ingredient remained strong.
Speaking after the AGM, Henry said (quoted by The Australian):
Of course, with high energy prices we’re seeing some inflation. But that hasn’t changed our very positive outlook for global economic growth. Our medium-term outlook for the recovery from COVID-19 is still for strong economic growth…
The Chinese steel industry will produce a billion tonnes of steel for the second year running, and our outlook for the Chinese economy does remain very positive.
How have BHP shares been performing?
Over the past 12 months BHP shares are up 3%. That compares to a 15% gain posted by the ASX 200 in that same time.
The BHP share price is down around 3% since this time last month.
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.