China will be the only major economy to grow in 2020 while developed economies will not start recovery until 2021, said Anglo-Australian mining giant BHP in its full-year earnings report released on Tuesday. 

"With the exception of China, the world's major economies will contract during the 2020 calendar year as a result of the COVID-19 pandemic," BHP said in its outlook, adding that the outlook for 2021 remains uncertain with considerable variation at the country level. 

The mining giant forecast: "Even with this rebound, our base case is for the world economy to be six per cent smaller than it would otherwise have been in the 2021 calendar year. We expect that China and the OECD will return to their pre COVID-19 trend growth rates from around 2023." 

The downbeat predictions cast a shadow over global demand for commodities including iron ore and coal for the year ahead. The potential for re-emergence of COVID-19 outbreaks in key markets is the main source of uncertainty in the company's commodities outlook. 

"[Global] Recovery prospects and speed may prove very uneven, varying considerably by country, thereby affecting demand for our commodities. Coupled with the potential for ongoing impacts on the supply side, the price outlook for our commodities is uncertain," BHP chief executive Mike Henry said during an online presentation. 

The company specified that "global crude steel production will decline in the 2020 calendar year, with solid growth in China offset by a steep fall in the rest of the world." It predicted that steel production is expected to decline by six percent for crude steel. 

BHP anticipated that global steel production will expand slightly faster than population growth in coming decades, with a plateau and slow decline in China will  be offset by growth in the developing world led by India. 

Iron ore prices have been elevated but can be expected to ease as Brazilian supply recovers, according to BHP. In the second half of the 2020s, China's demand for iron ore is expected to be lower than today as crude steel production plateaus and the scrap-to-steel ratio rises. 

Coal prices have weakened markedly. Barring further coronavirus outbreaks, a sustained improvement in prices is possible in the second half of the 2021 financial year, the company said. 
 

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