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Key points

  • Chinese environmental policies and controls are now the most demanding in the world, underpinning the demand for high quality iron ore.
  • Copper demand is expected to be steady in the medium term as emerging Asia continues to urbanise.
  • The exciting story for nickel will come in the mid-2020s when the electric vehicle revolution starts to kick in.

  • We expect oil demand to grow by approximately 1 per cent per year over the next decade.
  • Coal power is expected to remain competitive in India, where the coal fleet is only around 10 years old on average.
  • We anticipate India and south-east Asia will be the main sources of incremental growth in demand for seaborne metallurgical coal.
Close up of an iron ore reclaimer
Iron ore

Demand for iron ore is expected to slow in parallel with the multi-year adjustment process for supply conditions following the Brumadinho tailings dam tragedy in Brazil.

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Close up of copper pipe

The copper price has been affected by global business confidence and investor uncertainty.

Chinese copper demand has been weaker than expected so far this year due to the poor performance of the housing, electronics and auto sectors. This was offset by a solid performance in the machinery and household appliances sectors. The net result is that demand is now expected to grow by between 1.5 per cent and 2 per cent over the remainder of 2019.

In the medium and long term, we see copper as a very attractive growth commodity.

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Close up of a lump of coal
Metallurgical coal

Commodity prices will always fluctuate year to year as external conditions change, but we are generally constructive on the outlook for metallurgical coal, especially in the premium low volatile product bracket.

While there is a developed and growing market for mid-quality coking coal in regions such as India and south-east Asia, a price premium will remain for true premium low volatile coals, of which there is a supply scarcity.

China’s continued policy focus on the environmental performance of its domestic mines should increase, at the margin, the competitiveness of high quality Australian coals.

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Close up of an oil rig
Crude oil

Oil demand has closely followed trends in both regional and global economic activity, with solid growth in the US, China and India contrasting against weakness in Europe and developed Asia.

By 2030, we see the need for new production equivalent to at least one third of total global production today.

The industry’s lack of exploration success in the last half decade and the weak investment in conventional production over the same time period points to the need for known but more costly supply to fill the demand gap.

Looking beyond the 2020s on the demand side, we see an expected peak in the mid–2030s followed by a trend decline. However, this loss of demand is not expected to approach the decline rate of existing fields even beyond the peak in demand.

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Close up of nickel pellets

China is both the major producer of stainless steel and the major consumer of primary and processed nickel.

More than two-thirds of nickel is used in the stainless steel sector, but the exciting story for nickel is to come in the mid-2020s when the electric vehicle revolution really starts to kick in.

Today, battery demand is roughly 5 per cent of the primary nickel market, but this could rise to half of the market depending on how fast electric vehicles penetrate the traditional vehicle market.

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Image of coal on a conveyor belt
Energy coal

Energy coal prices softened over the first half of the 2019 and were on a weakening trend at the close of the financial year.

In the long term, energy coal is expected to progressively lose competitiveness to renewables on a new build basis, both in the developed world and in China. However, coal power is expected to remain competitive in India and other highly populated, low income emerging markets for a much longer time.

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Photo of steel girders
Steel and pig iron

Global steel production was solid in the first half of 2019.

Pig iron output growth has kept pace with total steel production for the year, reflecting strong operating rates among China’s blast furnace fleet.

India overtook Japan last year to become the second largest steel producer globally. By 2030, we estimate that the Indian low case for crude steel production will be almost double the Japanese high case for the same.

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Photograph of pipes processing liquefied natural gas
Liquefied natural gas

LNG prices have been weighed down by the large increments of new supply that came online during the first half of 2019.

Looking ahead, we see a positive outlook for LNG demand growth despite several uncertainties in Asia such as:

  • Energy mix policies in China and South Korea;
  • The level of infrastructure investment in India; and
  • The scale of nuclear restarts in Japan.

Outside Asia, the amount of Russian pipeline gas supplied to Europe also represents a swing factor for the outlook.

On the supply side, we’ve large amounts of new production came to market in 2019. Despite the strong demand growth projected for the medium term, we expect the market to be fully supplied until the middle of the 2020s.

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Photograph of potash

We have seen slow and steady gains in potash prices since 2016, but they have lost some of that momentum recently.

While potash demand can be volatile, we anticipate that a trend of demand growth between 2 per cent and 3 per cent per annum will continue through the 2020s.

In the medium to long term, potash stands to benefit from the intersection of a number of global megatrends, such as:

  • Population growth;
  • Changing diets; and
  • The need for the sustainable intensification of agriculture.

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Photo of a gas hob
Eastern Australian gas

The Eastern Australian natural gas market has been tight over the past 18 months as a result of competing demand from LNG export projects and declines in conventional supply.

There is a large resource base to meet long term domestic demand, but extraction and processing costs are rising.

New upstream investment will be required to ensure the industry continues to develop as traditional sources of supply plateau or start to fall off.

We believe that a clear policy foundation is required to encourage investment and bring needed supply to the market at reasonable cost.

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Economic and Commodity Outlook

Read BHP's economic and commodity outlook in full

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Data and events referenced on this page are current as of August 13, 2019. The data is compiled from a wide range of publically available and subscription sources, including Bloomberg, Platts, Wood Mackenzie, CRU, Thomson Reuters, Argus, Fertecon, FastMarkets, SMM, AME, Parker Bay, MySteel, LME, COMEX, SHFE, ICE, DCE, SGX and I.H.S Markit, among others. All monetary values are in US dollars unless otherwise specified.

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