BHP (ASX:BHP) share price ends lower amid continuing China trade woes

One of the mining giant's senior execs is warning of the risk to the Aussie economy of ongoing trade tensions with the People's Republic.

| More on:
Battle between ASX shares represented by 2 investors facing off short sellers

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in BPH Group Ltd (ASX: BHP)  fell today after a senior executive at the company warned that Australia's trade tensions with China are a danger to the economy. The BHP share price closed 1.1% lower on Friday, with shares in the resources company swapping hands for $47.75.

According to reporting by The Australian, president of BHP Minerals Australia Edgar Basto believes Australian producers could face a 50% decline in the sale price of coking coal if they are unable to export to China. Coking coal – also known as metallurgical coal – is used to make steel.

BHP produced around 70 million tonnes of coking coal in 2020.  

The coal was unofficially banned by the Chinese Government in October last year. ABC News reported late last year that, in 2019, 24% of Australia's coking coal was exported to China.

Let's take a closer look at Basto's sombre warning.

Trade tensions have BHP on edge

Yesterday, Basto spoke at the Competitive Advantage Forum, hosted by BHP and The Australian.

He told the forum that losing China as a coal trading partner could have a devastating effect on producers' bottom lines.

Basto was quoted by The Australian today as saying:

What we are seeing … in terms of the impact to coal prices is significant and it does have an impact…

I have heard comments like, you know, it is OK, the coal being produced in Australia and in Queensland is being placed in different markets so there's no harm there.

I don't think that is right because the differential in price is almost half what we are getting for our coal than what others are getting in China…

It's important to work in being competitive but you will start to see some production being taken out of the market because high cost producers will have to do that.

BHP is also a major producer of Australian iron ore. China's importing of the mineral is yet to be affected by the political tensions. Although, China's National Development and Reform Commission has said it plans to up its domestic iron ore production.

On the risk of Australia losing China as an iron ore trading partner, Basto was quoted by The Australian as saying:

The outlook looks good long term but unfortunately the here and now is a slightly different story…

Overall I think it's a risk to the Australian economy and it's an important risk and I think we should be candid in the way we evaluate the risk.

BHP share price snapshot

Despite a poor end to this week, BHP shares are still having a good run on the ASX recently.

Currently, the BHP share price is up 12.54% year to date. It has also gained 38.37% since this time last year.

The company is one of the ASX's largest, with a market capitalisation of around $142 billion. It has approximately 5 billion shares outstanding.

Motley Fool contributor Brooke Cooper 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.

More on Resources Shares

asx iron ore share price crash represented by meteor speeding through space
Resources Shares

Why did the iron ore price just sink below US$100?

What’s happening in the iron ore world?

Read more »

Codan share price A dismayed kid dressed as a scientist stands with his back to a rocket crashed into the ground
Resources Shares

Why I decided to sell my Fortescue shares

I’m not as excited about this mining giant.

Read more »

Three miners looking at a tablet.
Resources Shares

Broker names 3 ASX 200 mining stocks to buy

Big returns could be on the cards for buyers of these miners.

Read more »

A man wearing a hard hat stands in front of heavy mining machinery with a serious look on his face.
Resources Shares

Is there any hope for Sayona Mining shares?

What's next for the miner?

Read more »

a man wearing a hard hat and a high visibility vest stands with his arms crossed in front of heavy equipment at a mine site.
Resources Shares

3 ASX All Ords mining shares on the move following quarterly updates

Two of the ASX All Ords mining stocks are gaining while the third is sliding. But why?

Read more »

Miner looking at a tablet.
Broker Notes

Should you buy the dip on South32 shares?

Could the sell-off be a buying opportunity?

Read more »

Female worker sitting desk with head in hand and looking fed up
Resources Shares

With 20% short interest, what's next for Pilbara Minerals shares?

Can the most heavily shorted stock on the ASX reverse course?

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Resources Shares

Is the BHP share price a buy at a 52-week low?

Is this an opportunity too good to pass up?

Read more »