Shares of the ASX-listed BHP Group Limited (AU:BHP) stumbled after the company’s first-half update for FY24 disappointed investors. The company also announced the decision to evaluate its nickel business amid the challenges posed by the industry-wide downturn. BHP shares fell by 1.8% in today’s trading session, extending their downward trend in 2024 to a year-to-date loss of nearly 10%.
BHP is a multinational mining company producing diverse commodities like iron ore, coal, copper, nickel, and various other minerals.
Production Update
BHP maintained its production guidance ranges for all assets in FY24, except for metallurgical coal, which has been revised downward to a range of 23 to 25 Mt (metric tons) from the previous guidance range of 28 to 31 Mt. Energy coal production is now anticipated to reach the upper limit of its projected range.
Among its metals, copper production was up 7% in the first half of FY24 year-over-year, while Iron ore production was down 2%. Nickel production witnessed a 3% sequential decline in the second quarter but exhibited a 4% year-over-year increase in the first half. The production guidance for nickel remains steady, ranging between 77 and 87 kt for FY24.
Nickel Business in Turmoil
The main concern regarding the update was the ongoing challenges in the nickel industry. In 2023, nickel prices witnessed a more than 45% decrease, driven by a demand lag from EV manufacturers and new supply from countries such as Indonesia, hurting the Australian nickel producers.
BHP stated that it is currently analyzing options for Nickel West, a primary nickel supplier to the global battery metals market, to mitigate the impact of the significant decline in nickel prices. Additionally, the company is exploring cost-cutting measures and assessing the value of its nickel assets.
The company will disclose additional details in its first-half financial results, scheduled for February 20, 2024.
UBS analyst Lachlan Shaw maintains a negative stance on nickel, citing the expectation that operational challenges in the industry will continue for a longer term.
BHP Share Price Forecast
According to TipRanks’ consensus, BHP stock has been assigned a Moderate Buy rating, backed by 10 Hold and four Buy recommendations. The BHP share price target is AU$51.55, which is 12.6% above the current trading price.
