The BHP Group Ltd (ASX: BHP) share price has travelled higher in 2022 despite continuous volatility striking the ASX.
Geopolitical tensions between Russia and Ukraine have hijacked world headlines this month. In January, investors were worried about future interest rate hikes after inflation spiralled out of control.
Nonetheless, when looking at year to date, the mining giant’s shares have gained a tad over 15%.
At the time of writing, BHP shares are down 0.71% to $47.63.
BHP CEO embraces rising inflation
In the company’s half-year results released on Tuesday, management highlighted the strong performance despite operating in a challenging environment.
This came from favourable prices of the group’s main commodity, iron ore which surged above US$200 in July 2021. For every US$1 per tonne the price increased, BHP made $US119 million on H2 FY22 underlying EBITDA.
However, BHP CEO, Mike Henry noted that inflationary pressure has led to higher operating cost curves, and could impact project delivery.
As such, several commodity-linked uncontrollable costs have increased, and in some cases to record highs. An example of this is the severe staff shortage affecting the miner due to Western Australia’s border closure. This has caused materially higher labour costs.
BHP expects cost headwinds due to supply bottlenecks to remain in the 2022 calendar year. However, some easing of this may occur by the end of the period.
While the above may seem negative, Mr Henry stated that demand-led inflation in the broader economy is expected to continue for now. This reflects a healthy tension between rising demand and the ability for BHP to meet it.
He said, “that is fundamentally positive for the resources industry. After more than half a decade of industry wide capital discipline, positive developments in demand are broadly expected to manifest in tighter market balances.”
Mr Henry sees demand-led inflation as a positive for commodities, particularly BHP. This is because management believes it can better contain the impact of higher costs as opposed to other miners.
BHP share price summary
Despite travelling 15% higher in 2022, the BHP share price is relatively flat over the last 12 months, down 1.3%.
Investors heavily sold off the company’s shares in August after reaching an all-time high of $54.55. Since then, its shares hit a 52-week low of $35.56 in November, before surging back up to early June levels.
Based on valuation grounds, BHP presides a market capitalisation of roughly $242.84 billion and has approximately 5.06 billion shares outstanding.
The post Own BHP (ASX:BHP) shares? CEO says inflation is here to stay and it’s positive for the miner appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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