The views expressed here are those of the author, a columnist for Reuters.

By Clyde Russell

LAUNCESTON, Australia, Feb 20 (Reuters) - Mining heavyweights BHP Group and Rio Tinto delivered remarkably similar results and outlooks for key commodities this week, choosing to focus on the positives of the energy transition and to minimise the short-term risks.

BHP BHP.AX, the world's biggest mining company, reported on Tuesday a 23% drop in underlying attributable profit of $5.08 billion for the six months ending December 2024.

Reporting a day later, Rio RIO.AX, the world's biggest iron ore miner, unveiled underlying earnings of $10.87 billion for 2024, down 8% from $11.76 billion a year ago.

For both companies, the blame for the weaker earnings was squarely placed on iron ore, the key raw material for steel, and the commodity most dependent on China, which buys about three-quarters of global seaborne volumes.

Iron ore contracts traded on the Singapore Exchange SZZFc1 dropped 24% in 2024, largely as China's economy struggled to build momentum, especially in the key residential property sector.

The price declined even as China's imports rose to 1.24 billion metric tons in 2024, up from 2023's 1.18 billion tons.

However, data suggests the additional volumes were largely used to rebuild inventories with traders and steel mills taking advantage of the declining prices to restock.

BHP CEO Mike Henry used his remarks in the results presentation to talk up the prospects for a recovery in iron ore and copper, saying that global monetary easing is "expected to translate into a recovery for steel and copper demand across the OECD in the near term."

Henry did point out the risks arising from U.S. President Donald Trump's trade measures, but said BHP's direct exposure to the U.S. tariffs was small, given the United States only accounts for 3% of the company's revenue.

That may be true, but the real risk is that the tariffs spark a wider trade war that cuts global economic growth and also sparks rising inflation.

This presents policymakers with a dilemma of how to handle the inflation caused by tariffs, which calls for tighter monetary policy, coupled with slower economic growth, which calls for easing.

Given that inflation is likely to hit faster than weaker growth, the most likely outcome is that central banks pause their rate-cutting while waiting for inflation to ease and weaker growth to emerge.

This would challenge the rosy outlook for 2025 for commodity demand, which is largely dependent on the benign view of Trump's tariffs playing out, rather than the more realistic view of significant impacts as more measures are announced and other countries retaliate.

BEYOND CONTROL

Rio Chairman Dominic Barton said in his statement that the world is "clearly in a time of significant geopolitical volatility with conflict, trade tensions and polarisation at domestic and international levels."

"There will be further volatility in 2025, but we are working on what is within our control and Rio Tinto is well-positioned to manage risk," Barton said.

In some ways that's the key point. Much of what could occur in 2025 is beyond the control of companies and they will be hostage to geopolitical developments that could alter economic dynamics.

Both BHP and Rio were keen to talk up how well they are positioned for the energy transition, with both pointing to their copper assets, while Rio also touted the rapid ramp-up of its lithium project in Argentina.

BHP's view is that global copper demand will be more than 50 million tons by 2050, which is 70% above 2021 levels.

Over the longer term the implications are clear. BHP and Rio will both become more copper-focused companies while running their legacy iron ore assets as efficiently as they can in order to keep that part of the revenue base robust.

Both companies are effectively betting that Trump's impact on the world economy is limited.

The best-case scenario for 2025 is that Trump doesn't hit global growth too hard with tariffs, while from a longer-term perspective the hope is that the energy transition won't be derailed by Trump's climate change denialism and promotion of fossil fuels.

The views expressed here are those of the author, a columnist for Reuters.

(Editing by Jamie Freed)

((clyde.russell@thomsonreuters.com)(+61 437 622 448)(Reuters Messaging: clyde.russell.thomsonreuters.com@reuters.net))