The BHP Group Ltd (ASX: BHP) share price has come under pressure on Thursday.
At the time of writing, the mining giant's shares are down almost 3% to $50.86.
Despite this, the BHP share price is still up by a sizeable 20% since the start of the year.
Why is the BHP share price falling today?
Investors have been selling down the BHP share price today in response to the release of the Big Australian's third quarter operational update.
That update revealed that many of BHP's operations have been impacted by temporary labour constraints due to COVID-19. This led to the mining giant reporting softer than expected quarterly production and forced a downgrade to its guidance for some commodities.
In case you missed it, BHP reported:
- Iron ore production was flat quarter on quarter at 59.7Mt
- Copper production up 1% to 369.7kt
- Nickel production down 13% to 18.7kt
- Metallurgical coal production up 20% to 10.6Mt
- Energy coal production down 13% to 2.6Mt
- Petroleum production dropped 6% to 24.1 MMboe
How does this compare to expectations?
According to a note out of Goldman Sachs, its analysts were expecting a much better performance from BHP.
It had pencilled iron ore shipments of 67.2Mt, copper production of 413kt, petroleum production of 25.7 MMboe, and metallurgical coal production of 9.4Mt. The latter was beaten comprehensively, which is a positive given the sky high prices the steel making ingredient is commanding.
What else?
Also weighing on the BHP share price was management's outlook.
Although it has reaffirmed its FY 2022 production guidance for iron ore, metallurgical coal, and energy coal, it has lowered its copper and nickel production guidance.
BHP's full year total copper production guidance has been lowered to between 1,570 and 1,620 kt, reflecting lowered production guidance for Escondida. Whereas its full year nickel production guidance has been lowered to between 80 and 85 kt due to COVID-19 related labour constraints.
Positively, management reaffirmed its full year unit cost guidance for WAIO, Escondida, and Queensland Coal. And while it has increased its guidance for New South Wales Energy Coal, this reflects a targeted increase in the proportion of higher quality coal. This is so BHP can capture more value from the record high prices for higher quality thermal coal.
