UPDATE 3-BHP expects China to underpin commodities demand in 2023

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(Adds share price move, nickel and copper detail)

MELBOURNE – Jan 19 (Reuters) – China is set to be a stabilizing force for commodities demand this year as developed nations face economic headwinds, BHP Group Ltd said on Thursday as it posted higher quarterly iron ore shipments that beat expectations.

BHP joined peer Rio Tinto to expect that China’s measures to support its property sector will underpin solid demand for their steel-making products.

“China’s pro-growth policies, including in the property sector, and an easing of COVID-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half,” BHP said.

Rio however also said this week that China’s reopening from COVID-19 restrictions could raise near-term risks of labour and supply-chain shortages.

The world’s largest listed miner said iron ore production from mines it operates Western Australia on was 74.3 million tonnes for the three months ended December, up 1% from 73.9 million tonnes a year earlier and beating a consensus of 71.9 million tonnes.

The mining giant reaffirmed its fiscal 2023 forecast for Western Australian iron ore output at between 278 million tonnes and 290 million tonnes.

“It’s a pretty solid result. Pricing we expected would be weaker in the half, costs we expected would be higher, but the in the second half may be some relief,” as the rate of inflation growth slows, said analyst David Lennox of Fat Prophets in Sydney.

BHP raised cost guidance for its coal divisions, blaming inflation and after floods impacted operations this year, while reiterating that it would not make major investments in Queensland because that state had raised royalty payments.

“We see strong long-term demand from global steelmakers for Queensland’s high quality metallurgical coal, however in the absence of government policy that is both competitive and predictable, we are unable to make significant new investments in Queensland.” BHP boosted unit cost guidance for coal-mining joint venture BHP Mitsubishi Alliance to between US$100 and US$105 per tonne and unit cost guidance for New South Wales energy coal division to between US$84 and US$91 per tonne.

In copper, production at the Escondida in Chile was impacted by road blockades that disrupted supply of materials to the mine.

BHP said production at its Olympic Dam copper operation in South Australia had more than doubled to a near-record level after the completion of smelter maintenance. BHP plans to take over neighbouring copper producer Oz Minerals.

However nickel output fell by 2% to 38,000 tonnes, reflecting the slower than expected ramp up of BHP’s Nickel West refinery following planned maintenance in the December quarter.

Shares edged up by 0.3% to A$49.40. (Reporting by Harish Sridharan and Himanshi Akhand in Bengaluru and Melanie Burton in Melbourne; Editing by Devika Syamnath and Bradley Perrett)