BHP's First-Half Net Profit Fell on Weaker Commodity Prices — Commodities Roundup

–Gold futures are down 0.4% at $1,842 a troy ounce.

–Three-month copper is 0.2% lower at $9,089 a metric ton.

–Wheat futures are 0.6% higher at $7.81 a bushel.

TOP STORY:

BHP’s First-Half Net Profit Fell on Weaker Commodity Prices

BHP Group Ltd. reported a 32% fall in first-half net profit and pared its interim dividend from a record-high level, mostly because of weaker prices for some of the commodities it sells, including steel ingredient iron ore and industrial metal copper.

The world’s largest miner by market value said it made a net profit of $6.46 billion in the six months through December. It made a profit of $9.44 billion in the same period a year earlier, when strong commodity prices boosted its bottom line.

BHP said its underlying attributable profit-a closely watched measure that strips out exceptional items to illustrate the underlying performance of the business-totaled $6.60 billion, down 32% on the year-prior period. The market expected an underlying profit of roughly $6.82 billion, according to 15 analyst forecasts compiled by Vuma Financial.

OTHER STORIES:

Lithium Industry Looks to Australia for Refining, Not Just Mining

Lithium companies are looking to refine the crucial battery metal in Australia, where much of it is mined, in an effort to reduce shipping waste and develop new supply chains that bypass China.

The market for lithium-used in the production of electric batteries-is tight and likely to get tighter. Demand this year is expected to be 910,000 metric tons of lithium carbonate equivalent, or LCE, exceeding the 900,000 tons in supply. Benchmark Mineral Intelligence, which tracks the global battery supply chain, estimates that by 2030 around 2.7 million tons of LCE will be required annually, outstripping supply by 300,000 tons.

Around half of all lithium is mined in Australia, mainly in the mining-friendly jurisdiction of Western Australia. Most is shipped to China in a raw form called spodumene, which is about 6% lithium. Chinese companies refine it into lithium sulfate and then process it into the lithium hydroxide used to make cathodes for batteries.

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Energy companies are neglecting easy solutions to methane emissions, IEA says

Methane emissions from the energy sector rose for a third consecutive year in 2022, coming close to their previous record level as energy companies are neglecting cheap, readily available ways to bring down their greenhouse-gas emissions, the International Energy Agency said.

The increase comes despite a year of soaring energy prices and as global efforts to fight greenhouse-gas emissions that drive climate change accelerated, the Paris-based agency said Tuesday.

The explosions of the Nord Stream pipelines, which saw greenhouse gasses bubble to the surface of the Baltic Sea over several days in late September, also added to the increase.

Energy sector emissions rose to 135 million metric tons in 2022, the IEA said in its Global Methane Tracker report. The increase is the third consecutive yearly rise and brings energy sector emissions close to their highest-ever level, which was reached in 2019.

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Engie 2022 Net Profit Fell Despite Revenue Growth

Engie SA on Tuesday posted rising revenue for 2022 and set its dividend for the year, although net profit declined on impairment and credit losses and provisions.

The French utility company reported net profit of 216 million euros ($230.8 million) from EUR3.66 billion the previous year. Net recurring income, which strips out one-offs, came in at EUR5.2 billion, up from EUR2.9 billion the previous year, narrowly beating consensus expectations of EUR5.1 billion.

Earnings before interest, tax, depreciation and amortization increased to EUR13.71 billion from EUR10.56 billion the year earlier, beating consensus expectations of EUR13.62 billion, while revenue was up more than 60% organically, reaching EUR93.87 billion in the year.

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LG Chem Buys Stake in North Carolina Lithium Miner

South Korea’s LG Chem will take a stake in Piedmont Lithium Inc., boosting its North American presence and banking on incentives to scale up its role in U.S. electric-vehicle supply chain.

LG Chem will commit $75 million to Piedmont in return for a 5.7% stake in the miner, whose shares are listed on the Nasdaq and Australian Securities Exchange. Under the deal, Tesla Inc. -supplier Piedmont will also provide LG Chem with 50,000 metric tons a year of a raw form of lithium called spodumene for the next four years, and 10,000 tons a year of the more processed lithium hydroxide, once LG Chem’s new U.S. refining facilities in Tennessee and North Carolina are up and running.

MARKET TALKS:

Miners Drop After BHP, Antofagasta Earnings Fall Short

1025 GMT – Mining shares fall after BHP posted lower-than-expected first-half profit and Chilean copper miner Antofagasta’s annual earnings fell short of market forecasts. BHP’s 1H EBITDA modestly missed Citigroup and market expectations and the miner’s net debt was higher than expected, Citi says. Meanwhile, Antofagasta’s full-year EBITDA of $2.93 billion was below expectations, RBC Capital Markets says. Antofagasta has taken a hit from weather and production issues and lower copper prices, financial-services firm eToro says. Still, China’s economic re-opening and a potentially shallower-than-expected recession in the U.S. and Europe could support metal prices, it says. “Therefore, if Antofagasta can avoid any major production-process disruption, we should see copper and gold production increase in 2023,” eToro analyst Adam Vettese writes. (philip.waller@wsj.com)

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Oil Edges Down as Russian Supplies Balance China Hopes

0839 GMT – Oil prices edge lower as investors monitor the outlook for U.S. interest rates, China’s reopening and Russian oil output. Brent crude, the international oil benchmark, is down 0.4% at $83.70. Investors continue to hope that China’s reopening will drive oil demand higher later this year. A jump in Russian oil exports in recent weeks has kept a lid on prices, however. “Despite early reopening and a brighter forward macro-outlook, traders remain wary due to the surge in Russian oil exports,” SPI Asset Management says in a note. With concerns also present about the destination for interest rates in the U.S., Wednesday’s release of the Federal Reserve’s latest meeting minutes will be a key focus this week. (william.horner@wsj.com)

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Energy Crisis Fears Spurring Fossil-Fuel Investments in Africa

0442 GMT – Fears of an energy crisis sparked by Russia’s invasion of Ukraine appear to be outweighing the moral obligation to reduce carbon emissions, allowing investments in fossil-fuel projects in Africa such as Uganda’s 900-mile crude oil export pipeline to remain on track, says Zaynab Hoosen, analyst at Oxford Economics Africa. TotalEnergies’ $10 billion oil project in Uganda remains on track, with the country expected to start shipping as much as 230,000 barrels of crude oil a day to global markets in 2025. Hoosen notes that fears of an energy crisis have “provided a window for many companies to invest in new oil-and-gas projects in Africa without receiving heavy pushback from climate-change activists.” (nicholas.bariyo@wsj.com; @Nicholasbariyo)

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Metals Trade Mixed on Political Uncertainty

0826 GMT – Metals prices are mixed in early trading, with contrasting political messages coming from China and the U.S. providing uncertainty to markets. Three-month copper is up 0.3% to $9,141 a metric ton while nickel is down 0.3% at $26,955 a ton. Gold, meanwhile, is 0.4% lower at $1,842.80 a troy ounce. “From the macro perspective, the uncertainty comes from the political issues,” Marex’s Ruishi Hong says in a note. Hong says President Biden’s visit to Ukraine and promise of $500 million in military aid coincided with China saying it is seeking a “political solution” to the Ukraine crisis. China is also looking to boost private investment in real estate, including residential, commercial, and infrastructure projects, he adds. (yusuf.khan@wsj.com)

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Iron-Ore Futures Gain, Supported by Property Market Optimism

0354 GMT – Chinese iron-ore futures are higher in early trade, extending yesterday’s gains. The China Securities Regulatory Commission said late Monday that it will launch a pilot program for real-estate private equity investment funds to boost the embattled property sector. Optimism in the property market lifted its downstream sectors including steel and ferrous metal. Steel mills are resuming production and replenishing their stock, say analysts from Nanhua Futures. Fundamentals for iron ore, which is used in steel making, appear strong on increasing demand, they add. The most-traded May iron-ore contract on the Dalian Commodity Exchange is 3.1% higher at CNY916.5 a ton.(bingyan.wang@wsj.com)

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Miners’ Margin Squeeze Likely to Turn Around

0229 GMT – Entering the earnings season, Jefferies expected miners to report a margin squeeze because of softer prices and continued cost inflation, says analyst Christopher LaFemina. “This was the case for BHP and will likely be the case for Rio and Anglo, both of which report this week,” he says in a note. “However, we must keep in mind that earnings are obviously backward looking, and there have been significant changes to the macro environment in recent months,” LaFemina adds. China is reopening, U.S. inflation is cooling and Europe has avoided an energy crisis this winter, he says. For BHP, that points to a strong 2H and an even stronger FY 2024, says LaFemina, who reckons the 1H result BHP reported Tuesday will prove an earnings trough. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

Write to Barcelona Editors at barcelonaeditors@dowjones.com