In its half-year profit announcement, BHP said trade flows were beginning to adjust after the China coal ban, but the industry faced an uncertain future.

The company’s profit for the six months was down 20 per cent to $US3.8 billion ($A4.8 billion). It has, however, provided a boost to shareholders with a record dividend of $US1.01 ($A1.30), worth about $US5 billion, well above analysts’ forecasts.

Its underlying profit was $US6.03 billion. Its net profit was hit by $US2.2 billion in exceptional losses as it wrote down its energy coal assets. The COVID-19 pandemic cost it $US436 million.

Iron Ore produced earnings of $US10.2 billion with margin of 73 per cent. Metallurgical coal produced $1 billion with a 3 per cent margin.

“Long term, we believe that a wholesale shift away from blast furnace steel-making, which depends on metallurgical coal, is still decades into the future,” the company said.

“That assessment is based on our bottom-up analysis of likely steel decarbonisation pathways. Demand for seaborne hard coking coal is expected to grow alongside growth in the steel industry in coal importing countries like India.”

The option of using hydrogen to replace coal is being used in Europe but has yet to get much traction elsewhere. BHP has also invested in ways to reduce its emissions in steel production and has a net zero emission target of 2050. It was also on track to meet its 2022 target emissions at or below 2017 levels.

In its commodities outlook it said there was potential for further uplift in demand.

Outside China momentum was “picking up markedly” and utilisation rates were close to pre-COVID levels and margins were benefitting from higher prices.

But there was also a significant blowout in costs at its Queensland mines caused by maintenance issues and wet weather.

A stronger second-half performance is expected at Queensland coal with higher volumes and less planned maintenance. It is still considering its divesting from the Mitsui Coal joint venture

Its rollout of autonomous trucks at two Queensland coal mines was also on track.

BHP said the global economy would be 4.5 per cent smaller in 2021 than it would have been had COVID not occurred. This was an improvement of 1.5 per cent from six months ago.

RBC Capital Markets said BHP was in a strong position and the cash returns would help drive the share price.

“The recent recovery in energy markets is a relative positive for BHP versus its mining peers, but we think may also be closing a window around the potential for a large acquisition in the energy space – something which we think would have been very attractive from a counter-cyclical investment perspective but likely to add challenges in the group’s ESG narrative.

The broker has an “outperform” recommendation on the company and a $55 share price target.