BHP Group yesterday boosted its outlook for the global economy as the introduction of COVID-19 vaccines gathers pace, backing its optimism by rewarding investors with a record US$5.1 billion dividend payout for the first half of the year and fueling expectations for a new commodities super-cycle.
“The deployment of vaccines in key economies, albeit with some uncertainty as to timing and efficacy, removes a material amount of downside risk to the short-term demand and price outlook for our portfolio commodities,” the company said when reporting a 16 percent lift in first-half profit.
The biggest miner’s comments came as talk of a burgeoning commodities’ boom gathers pace with JPMorgan Chase & Co saying that a new super-cycle might have begun.
On the broader stage, global equities are on course to rise for 11 consecutive sessions — the longest stretch since 2009 — as investors take comfort in progress on the introduction of COVID-19 vaccines.
Iron ore futures last year surged 70 percent, boosted by China’s stimulus-driven recovery and supply disruptions in Brazil.
“Our analysis indicates that before prices can correct meaningfully from their current high levels, one or both of the Chinese demand/Brazilian supply factors will need to change materially,” BHP said.
“Buoyant iron ore prices underpin strong upgrade momentum for BHP,” Macquarie Group Ltd analysts said in a report.
The steel-making ingredient accounted for about 70 percent of earnings in the first half.
Still, China’s demand for iron ore is likely to be lower in the second half of this year, as the production of crude steel plateaus and scrap-to-steel ratios rise, BHP said.
China’s ore stockpiles hit their highest since November last year heading into the Lunar New Year holiday.
BHP expects a “constructive” short-term demand outlook for copper, which is seen benefiting from the shift to cleaner energy.
On Monday, copper climbed to its highest level since 2012.
There was also potential for supply disruptions in key producer Chile, due to an escalation of COVID-19 cases there.
Underlying profit was US$6 billion in the six months to Dec. 31 last year, BHP said yesterday, up from US$5.2 billion a year earlier.
The company is to pay a record interim dividend of US$1.01, up from US$0.65 last year.
BHP shares yesterday rose 2.7 percent in Sydney trading, while its main rival, Rio Tinto Group, added 3 percent.
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