BHP Billiton (BHP.US) Warned That Demand Volatility Would Lead To More Volatility in Commodity Markets

Mining giant BHP Billiton (BHP.US) warned on Tuesday of more volatile conditions in commodities markets due to soaring costs, weak demand, falling commodity prices and the threat of recession.

BHP Billiton said on Tuesday that global economic growth was slowing as a whole because of the Conflict between Russia and Ukraine, the European energy crisis and the global monetary squeeze. The company also said cost pressures would continue over the next 12 months.

The comments echoed those of rival RIO Tinto (Rio.us). Rio warned last week that Labour shortages, falling commodity prices and a possible recession were "significant" headwinds.

Gavin Wendt, senior analyst at investment house MineLife Pty, said: "While profitability remains strong, both miners are trying to prepare for market uncertainty in case demand slows significantly." "The miners' profits from commodities are falling back as conditions get tougher, putting pressure on margins."

Commodity prices have fallen sharply in recent months as demand has wobbled and fears of a recession have grown. At the same time, miners face rising costs. "We expect the lagged effects of inflationary pressures to continue into FY2023, along with tight Labour markets and supply chain constraints," BHP Chief Executive Mike Henry said in a statement.

BHP billiton yesterday released the fourth quarter of fiscal 2022 results showed that the company's iron ore production in Western Australia 71.66 million tons, down 1.6% year-on-year, up 7.4% quarter-on-quarter; Iron ore sales volume in Western Australia was 72.8 million tons, down 1.2% year on year. Both production and sales were below expectations.

David Radclyffe, senior mining analyst at Global Mining Research, said the outlook offered by BHP and Rio reflected "more uncertainty for some time to come," but added that "the balance sheets of both miners have never been better, This will help them to be in a good position to weather the downturn.