BHP eyes iron ore output ramp-up, admits underestimating China's steel demand resilience

BHP Group achieved record iron ore production in fiscal year 2024-25 (July-June) and is targeting further increases, as the company underestimated the sustained strength of China's steel demand, CEO Mike Henry said on an earnings call Aug. 19.

BHP achieved a record iron ore production of 263 million mt in FY 2024-25 and expects to produce even more in fiscal year 2026, with a target of between 258 million mt and 269 million mt, according to its financial results.

The company is now aiming to increase its production of the steelmaking ingredient to over 305 million mt/year, on a 100% basis, from the fourth quarter of fiscal year 2028 to meet demand from China.

"We're at kind of a point now where we were originally expecting that the Chinese steel demand would peak relatively sharply to the mid-2020s and then start to move into decline," Henry said.

"More recently, we've seen the steel demand in China remain elevated, so over 1 billion [metric] tons per annum for six years running now," he added. "So, it's been a bit longer than we expected, and we see there being a stronger case now for continued higher levels of steel exports out of China and a building case around depletion of some global export iron ore production."

China's steel production peaked at 1,065 million mt in 2020, subsequently declining to 1,005 million mt in 2024, and is expected to fall below 900 million mt/year by 2035, S&P Global Commodity Insights' Metals and Mining Research team said in a May 27 note.

Chinese steel prices have risen recently thanks to production cuts, which improved steel mill margins, and infrastructure investments, which drove expectations of increased demand, Commodity Insights analysts said in an Aug. 4 note.

"Rising steel prices have restored profit margins for Chinese steel mills to positive levels, with rebar margins in July reaching their highest point since October 2024," the analysts said.

China is also moving forward with the massive hydropower project on the Yarlung Tsangpo River in Tibet, valued at Yuan 1.2 trillion, or about $167 billion. The mega-dam project is expected to provide a "crucial stimulus to China's steel demand, which has faced challenges due to a protracted downturn in the domestic property market," they said.

Balancing demand and new supply

BHP is investing in a sixth car dumper and associated infrastructure at Port Hedland, Western Australia, to support its plans to increase its iron output.

While BHP has completed studies on options to further expand its West Australian output to 330 million mt/year long-term, "we haven't currently built them into our capital plans, [but] they remain there as further growth options for us as we see how the market unfolds," Henry said on the call.

"We always have to look at how finely balanced the market" is to determine whether it could bear another 25 million mt of capacity coming in, the CEO said.

BHP still believes that China's steel production will likely maintain its plateau around the 1-billion-mt level until the late 2020s but expects Chinese pig iron production to decline over this period as more scrap is used in steelmaking.

Looking ahead, BHP forecasts seaborne supply to increase as production from existing supply basins normalizes and as new capacity comes onto the market, including from the massive Simandou iron ore mine in Guinea.

Platts, part of Commodity Insights, assessed the IODEX CFR China 62% Fe price at $100.75/dmt on Aug. 19, up 7% year over year.