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A 'healthy recovery underway in China,' BHP CEO on what's driving demand

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BHP CEO Mike Henry joined Yahoo Finance Live to break down what's driving demand and the importance of the health of the global economy.

Video Transcript

[UPBEAT MUSIC]

SEANA SMITH: Welcome back. We've got strong results from BHP this week, the mining giant reporting its best first-half profit in seven years. We want to bring on Mike Henry. He's the CEO of BHP. And Mike, it's great to speak with you, BHP posting a profit jump of just around 16% here. I guess, first, just talk to us about what's driving demand and what are you seeing from a global recovery standpoint.

MIKE HENRY: Well, look, thanks for having me on. In terms of the-- what's driving demand, first of all, healthy recovery underway in China-- they were, obviously, came-- that economic recovery came more quickly than many expected. And in more recent months, we're seeing an acceleration of the recovery elsewhere as well. And for a company like BHP, the health of the global economy is everything.

ADAM SHAPIRO: There's a lot to talk to you about. There's coal and issues with China. But I want to jump to the future and, specifically, nickel sulfate. I don't really understand what the stuff is. But I know it's crucial to lithium-ion batteries. And we talk a lot about EV and Ford, for instance-- all electric in Europe by 2030. I got to imagine your growth plans are back on track for nickel sulfate.

MIKE HENRY: They absolutely are. So this is a very positive story. BHP is one of the world's biggest producers of what's called Class 1 nickel, which is the nickel that lends itself well to battery production. Nickel sulfate is an intermediate product where-- which is used for battery precursor. And we're in the process of building our first nickel sulfate plant in Western Australia right now.

SEANA SMITH: Mike, when you take a look, you mentioned the strength coming out of China. But I'm curious just what you're seeing in other parts of the world because I think there is some concern that many of the other countries are lagging pretty far behind. Is that the read that you're getting when you're looking at the demand that you're seeing from specific countries?

MIKE HENRY: No, not at all. So if anything, we're seeing an acceleration in the economic recovery and greater confidence growing around that recovery, as well, of course, as the vaccines get deployed.

Now, it's not to say that there's still not some uncertainty around COVID. We're keeping a close eye on that. But for now, things are looking pretty good and more positive by the month.

ADAM SHAPIRO: What's going on when we read about-- in the United States about BHP ships? It's not a formal lockout from China. But ships that are loaded with coal not delivering to China-- what is that about?

MIKE HENRY: OK. So there's been geopolitical tension, or tension between Australia and China, as of late. That has led to a ban on any Australian coal being imported into China.

Now, from a BHP perspective, our coal sales book is reasonably diversified. And so we've been able to ship all of our coal to other countries thanks to some great work on the part of the BHP marketing team and the strong customer relationships we have.

Now, we do see this as being a near-term challenge-- no certainty yet as to when that ban will be lifted. But the outlook for our steel-making coal business-- so a type of coal called coking coal or metallurgical coal-- it looks pretty bright because we sit on the world's premium-quality coking coal.

And as steel-makers seek to decarbonize, the type of coal that we produce is going to be in strong demand. And the value of that coal on the decarbonization journey, we think, is going to be even more recognized.

ADAM SHAPIRO: And I would imagine-- I think part of your earnings report talked about iron ore shipments actually up into China as it's rebuilding. But help us understand. You know, coal is still an integral part of the global infrastructure, of the global economy. It's not going anywhere in the next two decades, is it?

MIKE HENRY: So very important here that we distinguish between coal for electricity or power generation and coal for steel-making-- now, the coal for electric power generation is more easily substitutable than coal for steel-making. Now, we still think that there's going to be strong demand for that first type of coal, coal for power generation, for quite a while yet because of the existing infrastructure and the time it takes to substitute that infrastructure with renewables.

However, coal for steel-making, we think, is going to be even more resilient because whilst there's long-dated options around moving to green steel-- so steel-making that doesn't require coal-- that's even earlier in the transition. And it is going to take some time for that-- the economics of that type of steel-making to be improved and then for the current approach to steel-making to be replaced. So we see that as being a 2040s story.

SEANA SMITH: Mike, I want to ask you, because you became CEO of this company just over a year ago, and it's quite the time to take that position, how have you just navigated the past 12 months? And, I guess, how has that shaped your plans then over-- for the next couple of years?

MIKE HENRY: Well, thanks for the question. And it's a great one. This is really a story about people. So we have about 80,000 people that work in BHP across the world. And, you know, notwithstanding the-- kind of the strength of the Chinese economy, what's happening elsewhere, it's really the way that people have stepped up across the company to navigate some very challenging times.

That, combined with the support that we've had from local communities, business partners, governments, has allowed us to operate pretty much at full capacity for the past 12 months in spite of the COVID challenges we've had in the US and Chile, here in Australia. And it's just so impressive to see-- quite unbelievable, actually-- the effort that people have invested in keeping the business safely running. And that's what sits behind the stellar results that we've just brought in for the first half.

SEANA SMITH: Mike Henry, great to speak with you, CEO of BHP. We hope to speak to you again soon. Thanks so much for taking the time to join us today.